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• making additional pension contributions or reviewing your
pension arrangements
• how you might take profits from your business at the
smallest tax cost, and how the timing of payment of
dividends and bonuses can reduce or defer tax
• improvements to your billing systems and record keeping
system, or a general review of your current systems to
improve profitability and cash flow
• national insurance efficiency and employee remuneration.
Minimising the risk of late filing
penalties
It is important to keep your personal tax affairs in order so
that you avoid incurring any Tax Return late filing penalties.
The cut-off dates are shown in the calendar, but the current
penalties are:
Missed filing deadline
£100
Return 3 months late
An additional £10 for each
following day up to 90 days
Return 6 months late
Add £300 or 5% of the tax
due, if greater
Return one year late
Add £300 or 5% of the tax
due*, if greater
*In more serious cases, this penalty may be increased to
100% of the tax due.
The timetable for making tax payments is relatively
straightforward for the self-employed:
• 31 January in the tax year, first payment on account
• 31 July after the tax year, second payment on account
• 31 January after the tax year, balancing payment.
Again, a system of interest and penalties applies. For example,
if any balance of tax due for 2017/18 is not paid within 30
days after 31 January 2019, HMRC will add a 5% late payment
penalty as well as the interest that will be charged from
1 February 2019.
A further 5% penalty will be added to any 2017/18 tax unpaid
after 31 July 2019, with a final 5% penalty added to any
2017/18 tax still unpaid after 31 January 2020. Interest is also
charged on outstanding penalties, as well as on unpaid tax
and NICs.
If your business is incorporated, it will be liable to corporation
tax. Corporation tax is usually payable nine months and one day
after the end of the company’s accounting period.
If there are cash flow issues, HMRC might be persuaded to
accept a spreading of your next business tax payment – you
will have to pay interest at the HMRC rate, but keep to the
agreed schedule and late payment penalties will be waived.
Arrangements need to be put in place before the due date for
paying the tax, so talk to us in good time if you wish to apply.
Payments on account
Payments on account are normally equal to 50% of the
previous year’s net liability. A claim can be made to reduce your
payments on account, if appropriate, although interest will be
charged if your actual liability is more than the reduced amount
paid on account.
There is no equivalent mechanism to make increased payments
on account when the year’s tax will be higher, so you should
ensure that you build a reserve of money to pay the balance of
tax due.
Don’t wait until it’s too late if you have difficulties!
Please tell us in good time about any issues facing your
business, as we may be able to offer solutions.
Payments on account are not due where the relevant amount
is less than £1,000 or if more than 80% of the total tax liability
is met by income tax deducted at source. In these cases, the
balance of tax due for the year, including capital gains tax, is
payable on the 31 January following the end of the tax year.
Case Study
George is self-employed. His accounts are made up to
31 August each year. When we prepare the 2018 Return we
will be including his profit for the year ended 31 August 2017,
and that is the profit which will be taxed for 2017/18.
George’s payments on account for 2018/19 will automatically
be based on the 2017/18 liability.
Providing we know that George’s profits for the year to
31 August 2018 are significantly less than the previous
year, we can examine the figures, perhaps even prepare the
annual accounts and, taking into account any other sources
of taxable income, make a claim to reduce George’s 2018/19
payments on account, easing his cash flow by reducing the tax
payments due in January and July 2019.
Your next steps: contact us to discuss…
•
Starting up a new business
•
Raising finance for your venture
•
Timing capital and revenue expenditure to maximum
tax advantage
•
Minimising employer and employee NIC costs
•
Improving profitability and developing a plan for
tax-efficient profit extraction