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Reducing my January tax bill

I have now received my tax bill for 2013/14 which is due in January 2015. Last year my business made substantial profits, but this year I have incurred lots of expenditure and as a result my business profits have fallen. Is there any scope to reduce my payment and what are the ramifications if I do not pay on time?

For some taxpayers, the tax payment they make in January will be the balance of this year’s tax and also, a payment on account for next year. Payments on account are calculated as 50% of an individual’s net tax liability of the current year, and are used to “prepay” the tax liability due for next year- payable in the following January.

You may be liable to make payments on account if your net tax liability is more than £1,000 or less than 80% of your tax due was deducted at source.

Given that your net profit and the associated tax liability for the 2014/15 tax year is likely to be significantly less than the previous tax year on which the payments on account are based, you can make a claim to reduce them. The amount that you reduce these to, should reflect your estimation of the tax liability for the 2014/15 tax year.

If it is later found that you have overestimated the fall in your income, and consequently paid too little, you will be liable to pay interest on the difference between the amounts paid as payments on account and the amount actually due. Equally, if you have overestimated, you will be due a tax refund for the year and receive an interest supplement.

If this is something you would like to look into further, your local TaxAssist Accountant can take care of this and the rest of your tax affairs for you. Please contact us to be put in touch with your local office.

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0800 0523 555

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