how dose the tax system work

[rubin1961]

as title,iam self employed just over a year and my accountant said i pay tax for the year 2007 to 2008 but i have to pay tax for the following year aswell.
how dose this work and what percent do i pay.
thanks.

 

[scorza]

Sounds like your accountant fancies a bit of winter sun tbh. Never heard of anyone having to pay tax for the next tax year.

 

[csmager]

He could be correct - based on the opening year rules, you may end up paying tax on the same amounts twice (called 'overlap profits'). You haven't actually given a lot of information though!

Google threw up this, seems a reasonable explanation of the Tax System for the Self-Employed, including a brief bit on the Opening Year rules.

http://www.macintyrehudson.co.uk/content/padvisor_introtax/taxself.html

 

[2blue4u]

Your accountant is correct. You really ought to ask him to explain it to you.

 

[Cosimo]

Your accountant is correct. You really ought to ask him to explain it to you.

It is called payment in account, he will explain.

 

[Munky1080]

Yeah - my wife has to do this...it's basically 1/2 of next year's tax bill, which is cool if you make less next year than this year, because you'll have to pay less tax when it next comes time to pay...I think it's a bit silly though.

 

[csmager]

Helps with HMRC's cash flow though - they're not waiting till one day to get all their money in.

 

[Vonhelmet]

Yeah, it's a payment on account. If less than 20% of your tax will be collected by PAYE, you have to make payments on account. What they do is look at your tax bill for the previous year, then you pay half of that amount on 31 January, half on 31 July, and then you make a balancing payment (or you get a repayment) to make up the difference come the following January.

 

[Guv]

If you think profits will be lower next year you can reduce payments on account so it's less than half - speak to your accountant and/or HMRC.