HMRC’s statements have begun hitting the mat. And a lot of people are going to be alarmed and confused….
Anyone whose 2017 tax return was their first tax return after starting in business and
- their tax bill for that year was £1,000 or more and
- 80% of it is still outstanding
will have to pay a further 50% of that tax bill in January 2018, with the other 50% in July 2018. This is called a payment on account.
If you run a limited company and used to keep your dividends down to avoid paying personal tax in the past, you’ll get a nasty shock this year if your accountant hasn’t prepared you for it.
Due to a new way of taxing dividends, you will find you are not only paying personal tax for the first time/more tax than last year, but also being obliged to make payments on account (maybe for the first time). So it’s a very expensive time.
Next tax year the payments on account will be deducted from your total tax bill and you will just have to pay the balance.
BUT HMRC will add on yet another payment on account to that balance and charge you for that payment on account in July of that year, and so on every year from now onwards.
If you think your tax bill for 2018 tax year will be much lower than in 2017 you can claim for a reduction of your payments on account.
But you can’t just stick a finger in the air, because if you underestimate what your final tax bill will be you will get charged interest because your payments on account will be seen to be too low.
And when you are calculating next year’s tax bill, be very careful to make sure you’re taking account of budget changes, as increasingly us small biz people are getting hammered for more tax.
Personal tax for limited company owners will be even higher for the tax year 2019 onwards.
Statutory and business accounts and tax calculations are getting ridiculously complicated. Should you continue to do it yourself? Call me for help! Frances on 01737 559211.