Income tax - payments on account

phunkyphantom22

Hi there,

Just hoping someone can help me clarify something.

My friend is a self employed hairdresser - for the tax year 06/07, she was only self employed for about 3 months of it and her tax bill was aboout £50.

We've not calculated her tax for the year 07/08 yet, but it will be above the £500 limit.

In July 08, does she need to make a payment on account? When it states 'half of your last tax bill', which year is it referring to? 06/07 (in which case she would not have to make a payment on account) or 07/08 (meaning I will have to calculate it for her by July)??

Any help appreciated! Thanks! :001_smile:

Dean

phunkyphantom22 wrote: »

We've not calculated her tax for the year 07/08 yet, but it will be above the £500 limit.

Her payments on account will kick in on January & July 2009.

Regards

Dean

Poodle

Hi

The £50 liabilty for 06/07 should have been paid by the 31st January 2008.

There wil be no payments on account for the 07/08 tax year because the amount was under £500.

However, the full liability for the 07/08 tax year will have to be paid by the 31st January 2009, if the liability is over £500, plus a 50% 1st payment on account for the 08/09 tax year(based on the tax liability for 2007/08) i.e £500 + £250 = total due of £750 on 31/1/09

A 2nd 50% payment on account for the 08/09 tax year will be due by 31st July 2009


Also and as announced in the pre-Budget Report, the payment on account threshold for income tax self-assessment will double from £500 to £1,000 from 6 April 2009.


Poodle

phunkyphantom22

Hi! Thanks for your replies - still al little confused! :-)

The £50 for 06/07 has been paid - it was paid at end of 2007.

I have not calculated what her bill for 07/08 is yet, however it will be over £500.

So if someone was to make a payment on account in July 2008, this would be half the 06/07 bill but be a payment towards their 07/08 tax year and the remainder will be paid by deadline Jan 2009?

Therefore my friend will not have to pay in July 08, because 06/07 was under £500?

She will simply pay her 07/08 bill by Jan 09 latest and then in Jul 09 pay 50% of the 07/08 bill as a payment towards her 08/09 bill?

Poodle

phunkyphantom22 wrote: »

Hi! Thanks for your replies - still al little confused! :-)

The £50 for 06/07 has been paid - it was paid at end of 2007.

I have not calculated what her bill for 07/08 is yet, however it will be over £500.

So if someone was to make a payment on account in July 2008, this would be half the 06/07 bill but be a payment towards their 07/08 tax year and the remainder will be paid by deadline Jan 2009?

Yes, but that would have been the second payment on account for the 07/08 tax year, they should have also made a 1st payment on account in January 2008

Therefore my friend will not have to pay in July 08, because 06/07 was under £500?

Correct

She will simply pay her 07/08 bill Plus a 1st 50% paymet on accountby Jan 09 latest and then in Jul 09 pay 50% of the 07/08 bill as a payment towards her 08/09 bill?

and any futher amount outstanding on the 08/09 by Jan 10

Poodle

phunkyphantom22

Great - that makes sense now, thanks very much! :-)