Paying tax before the tax year is over on a self-assessment ?
A family member has just received a tax bill from his accountant on a self-assessment. They have asked him to pay 08-09's tax plus the predicted tax for 09-10 by January 2010. Is this normal practise to ask for tax that cannot be calculated yet ?
United Kingdom - 2 Answers
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Answer 1 :
Yes, it's called a Payment on Account. They are common for self-employed people.
Answer 2 :
Yes, this is normal practice. The amount he is asked to pay is based on last year's tax bill, and is half the amount of expected liability. There will be a similar amount in July, unless he has sent in his Tax Return, which will be issued in April. If liability less, he will get a reduced bill in July, if more, he will be asked to pay the same amount, but with a balancing payment in January 2011. This system attempts to give some parity with employed people, who have to pay tax as they earn the money. No months of free use of tax money for them. If relative thinks tax bill likely to be excessive (perhaps because profits are down) he can ask for a postponement. But if it is found the money was due all along, he will be charged interest on late payment from 31st January until money paid.
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