July 31st Summer tax deadline looms for self-employed
July 31st is little more than a week away, if you are self-employed then you may have to make a tax payment before this date, or risk a late payment fine.
In many ways it is the lesser known tax deadline. While January 31 looms large in the minds of all self-employed workers as the time when you need to get all your tax affairs in order and pay what you owe, the July deadline can be forgotten all too easily.
But remembering it is crucial if you want to avoid a fine and interest accruing on your HMRC debt.
The July 31 deadline is not the same as the January 31 deadline. You don’t have to submit another self-assessment; you just need to make a payment.
It is commonly referred to as the second payment on account – an interim payment on your last tax bill (the tax year to April 2017).
You don’t have to settle the full tax bill just yet, but pay something towards it. Importantly, the amount you have to pay is based on how much you earned last year.
If you paid £10,000 in the last tax year, HMRC assumes that you will earn about the same for the April 2017 tax year, so the payment on account will generally be half your last tax bill, or £5,000.
What if my earning changed this year?
If your income fluctuates year on year, or you had a particularly good year last year, you could be in danger of paying too much.
If you earned less in the tax year finishing April 2017 compared with the previous one you should contact HMRC and ask them to reduce your payment on account.
It is relatively simple to reduce your payment, just go to your personal tax account on the HMRC website and select the ‘reduce payments on account’ option.
“Although it is easy to do, you should not pursue this unless you did actually earn less. HMRC will take a dim view if you reduce your bill simply to defer payment and may well charge you interest on the underpayment.” Lucy Carter, Accountancy Services Manager
What if I can’t pay?
We know that HMRC aren’t sympathetic to people who don’t pay up. If you cannot pay on or before the 31st July then you should contact HMRC as soon as possible to explain the situation.
HMRC will usually allow you to set up a payment plan to get the debt paid, but you will start to accrue interest on the money owed (at about 2.75 per cent). If you do not pay the debt before the next payment is due in January you will start facing some pretty steep fines.
For more information please contact Umbrella Accountants on 01625 546 610 or email firstname.lastname@example.org