My accountant has just completed my 2006 tax returns.?
He tells me that as well as the tax return figure which I need to pay by 31st January 2008, I also need to pay an advancement, both in January and July, is this correct? I can't beleive I need to pay tax on earnings that I haven't earned yet? Please advise?
United Kingdom - 6 Answers
People Answers, Critics, Comments, Opinions :
Answer 1 :
I've never paid in advance, but I need to get my accounts done pretty soon. The dear old Customs & Extortion would appear to be putting us small businesses out to dry if this is the case.
Answer 2 :
Yes - I have had them do this to me before - although it was only for the first half of a year. I ended up getting a nice rebate at the end of it all too. Sadly the tax man seems to be able to just take money every which way from us and there is very little we can do about it.
Answer 3 :
i also have been told this, i started my business in April this year and i went to see my accountant to set things up , he warned me that the inland rev would want tax up front on next years 2008 earnings, what chance have you got of getting a good head start?
Answer 4 :
It depends. Do you have a job with a regular paycheck with deductions or you are a real estate agent with no deductions? Do you have a lot a allowances (9 or more) Did you make a profit on your stocks last year? If no on all above then look for another accountant.
Answer 5 :
if you owed tax for last year, that means you didn't get enough withheld, so you will probably owe for this year also, and you're supposed to make quarterly estimated payments in that case to avoid penalty and interest - you're paying in Jan and July next year - not now - January is probably for 2007 taxes
Answer 6 :
I think you mean your 2007 tax return. ok here is how it works. basically if your tax liability for 2007 is £2000 or more, then you have to pay 50% of the tax owed towards the 2008 year in Jan 2007 and then another 50% in july 2007. They are called Payments on Account. so for example based on a liability of £2000 for 2007, on or before 31st Jan 08 you will pay £2000 + £1000 = £3000 and then on or before 31st July 2008 you pay another £1000, this means £2000 goes towards next years tax bill. the inland revenue are assuming the next tax return you do will yield similar results and that the tax due is the same. they therefore make you pay this assumed liability in advance for two reasons, 1) they are greedy, 2) so that you dont have to find £2000 in january 2009. so if your tax due for 2008 is say £2500, then you have already paid £2000 and left with a balance of £500, but as the toal amount due is over £2000, you will need to pay half of the £2500 (£1250) + the £500, so a total of £1750 is due in jan 2009 and then £1250 due in july 2009. the problem with this method is that the first year tax return is always the hardest as you have to pay more, but when you come to do your 2008 tax return. the extra £2000 you have paid towards it, gets offset agains the tax due, so in Jan 2009, you wont have as much to pay, or if your tax due is less, you can either claim a refund or have the overpaid amount offset against any payments for the 2009 tax return. if however you suspect you are having a bad year for 2008. get your next tax return done by July 2008 as the payments on account are recalculated and will be reduced to the actual tax due, but seeing as you have paid more in Jan, the amount due in july would be a lot lower. hope this is clear enough.
Read more other entries :
