Understanding Payments on Account
7th September 2015
As Tax Manager in the Plus Accounting Healthcare Team, I understand how difficult it can be try to predict your income from one year to another; profit shares can vary in a Practice due to changes in the numbers of sessions worked or updates to profit forecasts. The position is made more complicated as the actual superannuation figures often vary from the superannuation estimates and this all means that tax bills can vary significantly from year to year.
Your payments on account for the current tax year are normally based on your previous year’s tax bill with half being payable on 31 January in the tax year and half being payable on 31 July after the end of the tax year. So for this current tax year, 2015-16, the first payment on account is due on 31 January 2016 and the second payment on account is due on 31 July 2016 and these payments will be based on your tax bill for the tax year 2014-15.
If you know that your self-assessment liability for the current year is going to be higher than it was for the previous tax year, if for example you have increased the number of sessions you are working or you have started doing Out of Hours work, you do not need to increase your payments on account. Any extra payment will not be payable until the balancing payment for 2015-16 becomes due in January 2017.
On the other hand, if you anticipate you will be reducing your hours and are expecting your self-assessment bill to be lower, you can estimate your tax position for the current tax year and reduce your payments on account accordingly. A word of warning however, if you get your sums wrong and reduce your payments on account by too much, HMRC will charge interest on the difference between the amounts that should have been paid and the amounts you actually paid until this is rectified.
If you would like advice on calculating your payments on account please contact our Healthcare Team on 01273 701200 or firstname.lastname@example.org and we will be happy to assist you.
Author: Karen Oliver, Healthcare Team
Plus Accounting, Chartered Accountants
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