Tax Question - Non disco related

[Cowlinn]

Hi All,

I've posted in this forum as I have a tax question, unrelated to a DJ business. I know there are some finance-savvy members on here so was hoping for advice. Mods tell me if this is not allowed.

I have submitted my return and have some serious questions.

My Tax return Calculation looks as follows:

Total amount due for 2014-15: £XXX (FINE)
First payment on account for 2015-16: £YYY (Huh?!)
Total to be added to Self Assessment account due by 31 January 2016: (XXX + YYY) (Why?)
Second payment on account for 2015-16 will be due by 31 July 2016: £XXX (Really?)

Do I really have to pay next years tax on imaginary earnings? I don't understand, why is that due before it's happened?

Is this mandatory or can I just pay it after I've earned it, like I have done this year.

Any help would be HUGELY appreciated as I know I'm being a bit cheeky posting here.

Thanks all.

[theoloyla]

Not an expert but they try to estimate what your tax bill will be for the coming year and ask you to pay on account. If they get it right you don't owe anything next time you submit a return. If it is wrong you get a tax refund (with interest) or pay them the balance.

[Cowlinn]

Not an expert but they try to estimate what your tax bill will be for the coming year and ask you to pay on account. If they get it right you don't owe anything next time you submit a return. If it is wrong you get a tax refund (with interest) or pay them the balance.

As a newbie Self Assessment submitter, that seems crazy! So we not only have to budget for this years tax, but also for next years?!

[Retrodisco]

you can apply to reduce the figure

[Cowlinn]

you can apply to reduce the figure

I know, still doesn't make sense to me.

[DeckstarDeluxe]

It's a good thing, no unpleasant surprises when you come to do next years.

[rth_discos]

Everything mentioned above is correct.

For year 1 it's a pain, but after this you are in the "routine", where in theory, your payments on account pretty much cover the tax bill.

So after this year, it should all slot in to place nicely.

Don't forget that the payments on account cover the year that you have just traded for (April 2014-April 2015), so you should have the money already saved away, along with the money for the payment you have made for April 2013-April 2014 (for which your tax return was for).

[Cowlinn]

Everything mentioned above is correct.

For year 1 it's a pain, but after this you are in the "routine", where in theory, your payments on account pretty much cover the tax bill.

So after this year, it should all slot in to place nicely.

Don't forget that the payments on account cover the year that you have just traded for (April 2014-April 2015), so you should have the money already saved away, along with the money for the payment you have made for April 2013-April 2014 (for which your tax return was for).

I have the money saved away for the expected tax bill however in theory I could NOT have the money for this unexpected next years tax bill (I do so it's not a problem) but for many newbies it could cause an issue.

[rth_discos]

I have the money saved away for the expected tax bill however in theory I could NOT have the money for this unexpected next years tax bill (I do so it's not a problem) but for many newbies it could cause an issue.

It's not unexpected though. Sorry if it sounds harsh, but this would have all been clear when registering as self employed if you do all the research.

Equally, it's another good reason to have an accountant, they can help with your financial planning as much as everything else.

https://www.gov.uk/understand-self-assessment-bill/payments-on-account details it all.

[Cowlinn]

It's not unexpected though. Sorry if it sounds harsh, but this would have all been clear when registering as self employed if you do all the research.

Equally, it's another good reason to have an accountant, they can help with your financial planning as much as everything else.

https://www.gov.uk/understand-self-assessment-bill/payments-on-account details it all.

You're absolutely right, I should have known - but I didn't.

I think the accountant is a good shout. Anyone know a good one?

[rth_discos]

I think the accountant is a good shout. Anyone know a good one?

I recommend going with someone local - it's much easier if you can meet with them. Also, smaller/independent accountants are often best for small businesses. They can get to know your business far better than a larger company of accountants will.

Better to be a bigger fish to a small accountant than a very small fish to a big accountant firm.