MT Expert - Finance: The tax self-assessment deadline

If you're self-employed, today's your last chance to pay your tax bill, warns ACCA.

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Last Updated: 31 Aug 2010

Today (31 July) is the second deadline for making a payment on account for the tax year ended 5 April 2009. Directors, partners, and those who are self-employed (or have more than one source of income) all have to make this payment.

With the first instalment paid in January, the 31 July payment covers the remainder of the tax owed, based upon the liability for the previous tax year. In working out this liability for the previous year, you will have taken account of tax deductions at source and tax credits on dividends. So each payment will usually equal half of the total amount in the previous year.

Taxpayers need to make the payment before today's deadline to avoid interest charges on late payment - although it's unfair that the taxpayer is charged interest on the underpayment. Since the Bank of England reduced interest rates, HMRC no longer pay interest on any overpaid income tax, despite the fact that they continue to charge interest on these underpayments.

The best way to make the payment is online, as your bank will confirm immediately that it has been sent. However, taxpayers will need to make sure that they send their tax reference number when paying online, or HMRC will not know who made the payment.

Taxpayers that have problems making the payment should contact the HMRC Business Payment Support line (the contact details are available on their website - www.hmrc.gov.uk), since in many cases they will allow taxpayers to defer payment – although they will charge interest on the debt. The people operating the support line tend to be understanding of the difficulties some taxpayers face. But always try to get a name or reference number from the person at the other end of the phone - the fact that you have logged the call can make all the difference if you have a problem later on.

In addition, because the payments on account are estimated according to income from the previous year, the widespread fall in earnings due to the current economic conditions means that many taxpayers won’t need to pay as much tax. That is, where current year profits are lower than last year, you can write to HMRC and ask for the amount of the tax payments to be reduced.

The final payment deadline, where the tax payments on account do cover the full tax liability in the current year, is 31 January. So for the tax year ended 5 April 2008, the final payment deadline was 31 January 2009. If this deadline was missed, a tax-driven surcharge of 5% was applied to the outstanding liability on 28 February. And if the liability has still not been paid by the 31 July 2009, another 5% tax driven surcharge will be applied. It should be noted that interest is also charged on the tax liability and the surcharge. Any taxpayers in this situation should definitely contact the HMRC Business Support Line immediately, rather than incur another onerous penalty.  

For those who find self-assessment difficult, professional advice is available. A Chartered Certified Accountant can be found by looking on the ACCA website at: www.accaglobal.com/publicinterest/finding.

Chas Roy-Chowdhury is head of taxation at ACCA (the Association of Chartered Certified Accountants).

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