Self-assessment - payment on account...why?

[Tiggy_dorset]

It's claimed to help spread the payments etc etc...

Maybe I am missing something, but the way I see it:

You are essentially paying next years tax bill up front, therefore you are always in credit with the tax man.
Yes it's good to be in credit.

If your tax bill is over £1000, you are forced to pay up front, unless you claim for a reduction and give reasons why.

It sounds to me like the taxman has just simply doubled his earnings for the year the system was introduced (getting the interest for that one year using our money which he is in debt to us for, and we lose out on that interest for one year). It just sounds like a quick money maker for him, except it will have only been effective for one year, now that it will have balanced back out.

I just feel scammed at having to pay upfront when I would rather not have to pay a double tax bill. I will pay it, but was quite happy with the status quo of paying what I owe on time as always. Just seems like a pointless and confusing excercise.

(for the record, this is the first year my tax bill has been over £1000, which is why I am griping over paying more than what I actually owe)

 

[Kayos]

I’ve always paid tax the year it was due, self employed on and off over the years

 

[MattH]

But you are paying in Jan or July for the first six months of the current tax year which started in April of the previous year. So technically you have already worked and earned the income that you are paying the tax over on.

Don't get me wrong, it grates on my nerves as well but there is some "logic" behind it.

 

[Hood]

Weird thing about my tax is I am 2 years behind. Why I have no idea but originally I was a share Fisherman and that was the way at the time. I was hauled in to the tax man one year and it was the year everything was changing from April to April but for some strange reason he said they will just keep me the way I was. So the returns I have just filed are from 18th Aug 2015 to 17th Aug 2016.

 

[Tiggy_dorset]

But you are paying in Jan or July for the first six months of the current tax year which started in April of the previous year. So technically you have already worked and earned the income that you are paying the tax over on.

Don't get me wrong, it grates on my nerves as well but there is some "logic" behind it.

I guess technically you are correct. I always pay towards the final deadline, have all the figures collated long before, but always tend to leave it to the deadline for paying.

 

[Hood]

Also the good thing about me being 2 years behind is if I have a large amount to pay on account and the next year will actually turn out less, then I can submit my return in April and get the on account adjusted accordingly

 

[arther dailey]

Mine goes from Jan1st to 31st december,has for years,although cant get logged in to do them at the moment as they have decided to use my old security no.s for some reason not the ones they gave me 4 years ago? So have extended my deadline by one month ,awaiting new "old" codes to come through.
Really was hard trying to get through to them on the phone though to sort it out.

 

[Wallace]

Mine goes from Jan1st to 31st december,has for years,although cant get logged in to do them at the moment as they have decided to use my old security no.s for some reason not the ones they gave me 4 years ago? So have extended my deadline by one month ,awaiting new "old" codes to come through.
Really was hard trying to get through to them on the phone though to sort it out.

I need to phone them and find out why my login details have not been sent yet.

 

[skotl]

My wife is self-employed and this also drives her nuts. As mentioned above, too, if you have a good year then the taxman assumes that will continue next year - you both take a dip in earnings and have a higher tax bill to pay.

It all evens out over time but it definitely smells like the taxman getting his cake in advance.

 

[ukracer]

My wife is self-employed and this also drives her nuts. As mentioned above, too, if you have a good year then the taxman assumes that will continue next year - you both take a dip in earnings and have a higher tax bill to pay.

It all evens out over time but it definitely smells like the taxman getting his cake in advance.

I think its so if the Bigger button than Jungs is pressed the tax man has already been paid/...

 

[Wallace]

Just asked my other half the question as to why the payment on account as she worked for the Revenue. It was bought in with Self Assessment around ‘96 (originally £500) to reduce the risk of people getting in arrears, bring money in part way through the year and reduce the workload at year end. If you have reached the £1000 you pay 50% on account In January 8 months into the Tax Year and the rest in July. You can set up a direct debit to pay on account monthly, no interest is paid on this money unless there is an overpayment once the calculation is done.

Also, if you think this year is not going to be as good as last you can ask for the payment on accountto be reduced.

Personally, 8 months into the Tax Year I know how well I’m doing (or not!) that year and the Tax on account is covering what’s owed. Running a business or being self employed is stressful enough without the worry of owing the Revenue money.

 

[mrsbruce]

I used to do it myself, fill in the tax return at the end of January, and end up paying extra tax, although it sorted itself out. Understandable, and I’m sure avoidable if you complete the return in April, as I smugly do now.

Or has that changed.

 

[Hood]

I used to do it myself, fill in the tax return at the end of January, and end up paying extra tax, although it sorted itself out. Understandable, and I’m sure avoidable if you complete the return in April, as I smugly do now.

Or has that changed.

I think you will still have payments "on account" but because you fill in the returns before that is due to be paid then it won't have to be paid as your new return will nullify/adjust it.

 

[moose]

Year after closing accounts and working full time for Local Govt, tax man sent me a tax bill off several 1000's pounds, so phoned old accountant had been using he assured me that whilst running the business all the taxes were paid, I had explained that I had filled in the form, and he said had you remembered to put the amount taxes paid in the other, I had the form in front of me (a copy) looked realised I had missed it.
He said give them a call and they will be owing you money, phone the taxman explained what had happened and how could prove I had paid the money etc (accountant had explained all this), Mr Taxman said that's ok yes I think we will owe you money, so I explained as if I owe you money for the following year, I have to pay the Tax in advance, now you owe me money so you can pay me in advance, he said it did not work like that!

 

[RonA]

Year after closing accounts and working full time for Local Govt, tax man sent me a tax bill off several 1000's pounds, so phoned old accountant had been using he assured me that whilst running the business all the taxes were paid, I had explained that I had filled in the form, and he said had you remembered to put the amount taxes paid in the other, I had the form in front of me (a copy) looked realised I had missed it.
He said give them a call and they will be owing you money, phone the taxman explained what had happened and how could prove I had paid the money etc (accountant had explained all this), Mr Taxman said that's ok yes I think we will owe you money, so I explained as if I owe you money for the following year, I have to pay the Tax in advance, now you owe me money so you can pay me in advance, he said it did not work like that!

As Groucho Marx said “It’s not the principle, it’s the money”