Payment on Account

OCTOPUS

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Totally panicked, have just done my Tax Return for this year and have found out that in addition to paying my tax for this tax year, I have got to pay two payments on account, one in January, one in July. I am not much over the tax limit (only about £4,000) so this really isn't funny. Totally panicked as have to pay about a grand more than I thought by January 31st. Looks like I'm going to be working just to pay my tax bill. Just wanted to check I have got this right as really stressed.
 
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Jon

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Totally panicked, have just done my Tax Return for this year and have found out that in addition to paying my tax for this tax year, I have got to pay two payments on account, one in January, one in July. I am not much over the tax limit (only about £4,000) so this really isn't funny. Totally panicked as have to pay about a grand more than I thought by January 31st. Looks like I'm going to be working just to pay my tax bill. Just wanted to check I have got this right as really stressed.
here you go


EXAMPLE OF A PAYMENT ON ACCOUNT:
Susan is a self-employed seamstress. She has Income Tax and class 4 NI of £1,200 to pay for 2014/15, her first year of business. This is all due to be paid to HMRC by 31st January 2016.

Because her liability is over £1,000 and she does not pay tax at source, she must also make payments on account for 2015/16. These are due on 31st January 2016 and 31st July 2016, and are calculated as £1,200 / 2 each.

That means that on 31st January 2016, Susan must pay £1,200 + £600 = £1,800 to HMRC!

When Susan actually does her tax return for 2015/16, let's say her liability for that year was actually £1,300. She'll already have paid £1,200 on account for that, so she has only £100 to pay to make up the difference. This is called the 'balancing payment' and will be due by 31st January 2017.

She will also have to make payments on account for 2016/17 of £1,300 / 2 = £650 each, on or before 31st January 2017 and 31st July 2017.
 

OCTOPUS

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That's what I thought, better get working extra hard
 

Jon

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That's what I thought, better get working extra hard
Make sure you are claiming all the expenses you are able to for being self employed and working from home
 

OCTOPUS

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Wow, I didn't realise about that, will look into it.
 

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The problem is I can only work in the lounge
 

homie

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The problem is I can only work in the lounge
Its ok to only work in one room, but you have to be using that room for other things too.

Eg. You work in the billiard room 2 hours a day but use it to play games and entertain your friends the rest of the time. - Is fine

However, if you worked in the ballroom all the time and that was the only thing you ever did there then HMRI could say it is a dedicated place of work which is where it leave you open to capital gains tax.

That's my understanding of the theory anyway.

Alternatively there is a simpler method where you just claim a fixed rate every month for the hours you work at home.

Edit: I meant HMRC, dunno why i said HMRI, thats the Railway inspector !
 
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Its ok to only work in one room, but you have to be using that room for other things too.

Eg. You work in the billiard room 2 hours a day but use it to play games and entertain your friends the rest of the time. - Is fine

However, if you worked in the ballroom all the time and that was the only thing you ever did there then HMRI could say it is a dedicated place of work which is where it leave you open to capital gains tax.

That's my understanding of the theory anyway.

Alternatively there is a simpler method where you just claim a fixed rate every month for the hours you work at home.

Edit: I meant HMRC, dunno why i said HMRI, thats the Railway inspector !
Yeah you are spot on. The room needs to be something else in the house a well. So maybe you work at a desk in a bedroom, or maybe your desk is in a spare room that you use for storage and has all our book selection on it.

I think it's to do with capital gains when it comes to selling the house. So you can run your business from home but you can't use a room exclusively for your business or else your house gets defined as something else when you sell it.

Remember that it's not a good idea to use any part of your home solely for business activities all the time and never use it for any private activities, because capital gains tax will then be due on the part you use just for business if, and when, you sell your home. Instead, try to make sure that your work space serves a dual purpose. For example, use an office at home as music room as well - you could prove that to a visiting HMRC inspector by having a piano in there.

And yeah you are right if you want to keep it simple there is a set rate you can just use instead

The flat rate method
The flat rate method simply asks you to look at how many hours a month you spend running your business at home, on average, and include a fixed amount in your accounts for business use of home.
The amount varies with the number of hours per month you work at home, as follows:
  • 25-50 hours: £10 per month
  • 51-100 hours: £18 per month
  • 101 hours or more: £26 per month
Using this method will certainly be quicker than working out your actual costs. However, the figure might not be as high meaning that you could save time but pay more tax. It's also important to note that the flat rate method covers only costs for heat, light and power - you will still need to work out how much you can claim for your other costs, such as rent, council tax, and telephone and broadband.
So Energy, Broadband, Mobile Phone, Rent / Mortgage Insurance etc. Claim for all of it if you work from home
 
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Jon

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Paid my 2018/2019 tax bill today. It still irks me that you have to pay this balancing payment / payment on account.

I know it all evens out in the end but it still annoys me that you give them this money up front!!
 

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Having done a short stint in a tax office, I'd say they're very inefficient and bureaucratic. Surely there's a better way of administering tax?

Can you still claim these allowances if you're renting a property?
 

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Having done a short stint in a tax office, I'd say they're very inefficient and bureaucratic. Surely there's a better way of administering tax?

Can you still claim these allowances if you're renting a property?
yeah you can, leccy, gas, broadband etc..

If you own then you claim the mortgage interest

@katykicker rents and i'm pretty sure she claims a % of the rent they pay (divided by the number of rooms)
 

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Cheers. I saw summit in my tenancy agreement about not carrying out business activities from the premises.

I'm on prepay electric and use a sim only unlimited data plan. Will speak to hmrc to clarify.
 
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Jon

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Thw
Cheers. I saw summit in my tenancy agreement about not carrying out business activities from the premises.

I'm on prepay electric and use a sim only unlimited data plan. Will speak to hmrc to clarify.
you could always use the flat rate solution which HMRC allow

 

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Thanks. Every little helps lol
Yeah I mean gas / leccy / council tax / Broadband / mortgage interest all add up to THOUSANDS you can claim back each year!
 

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