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Inland Revenue Question
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What will be the latest date (month will do) that Tax will be payable to the Inland revenue on earnings for tax year 2004-2005?
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It depends on what source the eanings are derived from. If it is income from employment, then the tax deducted by your employer will be paid over to the Inland Revenue by 19 May 2005 at the latest. If it is self-employed income or other income not taxed at source, then you will declare the income on your tax return for 2004/05 (which you will submit after next April)and pay any tax due by 31 January 2006. If this is your first year of receiving income not taxed at source, you will be expected, also on 31 January 2006, to pay 50% of your 2004/05 tax bill again, as a payment on account for the next year (subject to the Inland Revenue allowing a reduced payment in specific cir***stances). You will therefore effectively pay 150% of your 2004/05 tax bill on 31 January 2006. You will then pay a further 50% (of your 2004/05 bill)on 31 July 2006, and the following 31 January you will pay the balance of your tax bill for 2005/06, plus a new payment on account for the next year (equivalent to 50% of your 2005/06 bill). If the earnings you are talking about for 2004/05 are not from a new source, then you may alreasy be making your "on account" payments in this way. Please clarify what the source of these earnings is.
I am basically a Sole trader as at 15 march 2004. I am trying to find the best thing to do with my money set aside for tax and just wanted to know how long I could leave it in an investment. I don't intend to be self employed for long as I hope to get taken on as an employee within the next year. So if I understand you correctly the first lot of tax will be payable Jan 06?
I didn't know about the 50% bit though. Will this still apply if I am taken on before the next tax year?
If you have ceased being self-employed when you come to pay your tax on 31 Jan 2006 you can make a claim to reduce or cancel a payment on account for the next year, on the basis that you are now an employee and paying tax at source. Bear in mind though that the payment on account you are then making is for the 2005/06 tax year, so you may still have some tax to pay if your self-employment goes over into that year. Think carefully about the date you started your business as the date you have given is in 2003/04, not 2004/05.
I don't know if you are aware of your National Insurance obligations, you need to pay a weekly amount (�2.05) unless your profit is going to be less than around �4200 a year, then you can claim exemption. You will also pay Class 4 national insurance contributions on your profits at a rate of 8% on profits over �4745 (falling to 1% on profits over �31720), so you have to put this aside also. Sorry if you already know all that, just trying to be thorough! If your turnover (ie gross takings) looks like it will be over around �50000, you will also have to think about whether you are liable to register for VAT.
Forgot to mention, once you have established the date you started in business, you should notify the Inland Revenue that you are now self-employed and they will make arrangements to get you paying your weekly national insurance contributions. SO, basically you have got until 31 January 2006 before any major pay-out of tax.
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