HM Revenue & Customs have lots of ways to confuse the average business owner but one of the best ones is the payment on account system.
Put simply, if you have a personal tax bill (not company) of over £1,000 at the end of January, HMRC will ask you to pay another 50% on top for next year’s tax bill.
Which means your tax bill could have another £500 on it – minimum.
Often business owners forget this and its a nasty surprise to have to pay extra.
So…..
We are just 23 days from paying personal tax bills, double check that you are not going to fall under the payment on account rules.
If you are self employed, you most certainly will. If you are a director of a limited company, you should have a personal tax bill anyway (unless you are taking over £38,000 from your company).
This 50% is HMRC’s way of assuming that your business will just have exactly the same profit as last year – which is obviously never the case. This can be reduced if you believe that you won’t make as much profit as last year.
