Why You Should Sign Up for HM Revenue & Customs Updates
Stay informed about the latest tax and customs news by signing up for free updates from HM Revenue & Customs. In today’s fast-paced world, it’s important to stay up-to-date with changes in tax regulations and policies that can directly impact your financial situation. By subscribing to these updates, you’ll gain valuable insights, tips, and advice that can help you navigate the complex world of taxation.
The Dangers of Late Payments for the Self-Employed
For the 4.4 million self-employed individuals in the UK, paying income tax bills in advance in installments is a common practice. However, failing to meet the payment deadlines can have severe consequences. This year, late-paying self-employed individuals may face unexpectedly higher bills due to a record rise in late-payment interest costs.
It’s essential for self-employed individuals to understand the potential pitfalls of missing payment deadlines. Tax experts have warned that those who fail to meet the July 31 deadline will be subject to late interest costs of 7.5 percent, up from 5.5 percent at the beginning of the year. This significant increase in interest rates can quickly accumulate and add to your debt.
Dawn Register, director of tax dispute resolution at accounting firm BDO, explains that many people may be unaware of the sharp change in interest rates imposed by HM Revenue & Customs. This lack of awareness can result in a financial shock for taxpayers who were accustomed to paying modest interest rates in the past.
Mike Hodges, a partner at Saffery Champness, emphasizes the importance of not overlooking tax deadlines. With the demands of daily life and work, it’s easy to become consumed by other priorities and forget about tax obligations. However, failing to meet these deadlines can have serious consequences.
Understanding Payments on Account
Payments on account are a common practice for self-employed individuals. These payments are made twice a year, with the first payment due on January 31 and the second on July 31. The amounts are based on the previous year’s income and are meant to prepay income tax bills.
However, it’s crucial to understand the implications of payments on account and the potential penalties for late payments. The government charges a penalty of 2.5 percentage points above the Bank of England base rate for any late payment of tax bills. With the recent increase in the base rate from 0.1 percent to 5 percent, taxpayers now face a 7.5 percent interest rate on late payments.
The Register warns that there is always the possibility for further escalation in interest rates, underscoring the importance of meeting tax payment deadlines. Stefanie Tremain, a partner at accounting firm Blick Rothenberg, also reminds taxpayers that payments on account aren’t exclusive to the self-employed. Individuals with high levels of investment income or ownership may also be required to make these payments.
Ensuring Financial Stability in Tax Payments
It’s crucial for individuals facing financial hardship to proactively address their tax obligations. If you’re struggling to meet tax payment deadlines, contacting HM Revenue & Customs to discuss a longer-term payment plan can help prevent further financial strain.
Taxpayers who meet specific criteria may be exempt from making payments on account. If your last tax bill was less than £1,000 or if you have already paid more than 80 percent of the tax due for the previous year, you may not be required to make these additional payments.
However, it’s important to consider the long-term implications of exempting yourself from payments on account. By making these prepayments, you can avoid the burden of large lump-sum tax payments and instead spread the cost evenly throughout the year.
Additional Insights and Practical Examples
While the original content provides valuable information on the dangers of late payments and the importance of payments on account, it’s essential to delve deeper into the subject to provide unique insights and perspectives.
1. Planning Ahead for Tax Payment Obligations
One practical tip to avoid the financial strain of tax payment deadlines is to plan ahead. By consistently setting aside a portion of your income for tax obligations, you can avoid last-minute scrambles to gather funds for payments. This proactive approach not only ensures that you meet your tax payment deadlines but also helps you budget effectively throughout the year.
For self-employed individuals, financial stability is paramount when it comes to meeting tax obligations. By regularly monitoring your income and setting aside an appropriate amount for tax payments, you can ensure that you’re well-prepared when the payment deadlines approach.
2. Seeking Professional Advice for Tax Planning
Navigating the complex world of taxation can be challenging, particularly for self-employed individuals with constantly changing income streams. Seeking professional advice from accountants or tax advisors can help you understand the most effective tax planning strategies and ensure compliance with tax obligations.
A knowledgeable tax professional can provide personalized advice based on your unique financial situation. They can help you identify tax-saving opportunities, ensure accurate record-keeping, and optimize your tax payments. With their guidance, you can maximize your financial stability and minimize the risk of unexpected tax bills.
3. The Importance of Record-Keeping for Tax Compliance
Maintaining accurate and up-to-date financial records is essential for self-employed individuals. Proper record-keeping not only helps you stay organized but also ensures compliance with tax regulations.
By maintaining detailed records of your income, expenses, and tax payments, you can easily calculate and verify your tax obligations. Keeping track of invoices, receipts, and other relevant documents can also help you claim eligible deductions and reduce your taxable income.
Utilizing accounting software or hiring professional bookkeepers can streamline record-keeping processes, saving you time and eliminating potential errors. By prioritizing record-keeping, you can maintain a clear financial overview and effectively manage your tax payments.
Summary
By signing up for free updates from HM Revenue & Customs, you can stay informed about the latest tax and customs news. Understanding the dangers of late payments and the implications of payments on account is crucial for self-employed individuals.
Planning ahead, seeking professional advice, and maintaining accurate financial records are essential practices for navigating the complex world of taxation. By adopting these strategies, you can ensure financial stability and compliance with tax obligations.
—————————————————-
| Article | Link |
|---|---|
| UK Artful Impressions | Premiere Etsy Store |
| Sponsored Content | View |
| 90’s Rock Band Review | View |
| Ted Lasso’s MacBook Guide | View |
| Nature’s Secret to More Energy | View |
| Ancient Recipe for Weight Loss | View |
| MacBook Air i3 vs i5 | View |
| You Need a VPN in 2023 – Liberty Shield | View |
Receive free updates from HM Revenue & Customs
we will send you a myFT Daily Recap email rounding up the latest HM Tax and Customs news every morning.
The self-employed who prepay their tax in installments twice a year could face unexpectedly higher bills if they pay late this year, due to a record rise in late-payment interest costs.
Many of the UK’s 4.4 million self-employed people pay their income tax bills in advance in installments twice a year, in amounts based on the previous year’s income.
The first of the so-called “payments on account” expires on January 31 of each year. The second is on July 31.
However, tax experts warned that if people miss the July 31 deadline this year, they will face late interest costs of 7.5 percent, up from 5.5 percent at the start of the year. .
Dawn Register, director of tax dispute resolution at accounting firm BDO, said: “With many people struggling with higher costs of living, some may be tempted to pay less than they pay on account.
“But taxpayers should be aware that doing so will mean a 7.5 percent late payment interest rate will be applied to all outstanding money owed. This is the highest rate we have seen in 15 years, and the unsuspecting may be alarmed at how quickly this fee can add to your debt.”
She said taxpayers may have been accustomed to paying modest interest rates on late payments in the past and therefore may not be aware of the sharp change in interest rate from HM Revenue & Customs, warning that the current rate would be a “real shock” to many.
The government charges a penalty of 2.5 percentage points above the Bank of England base rate for any late payment of tax bills. Since the base rate increased from 0.1 percent in December 2021 to 5 percent last month, taxpayers now face a 7.5 percent interest rate on any late payment.
“There is always the possibility that this could escalate further,” the Register warned.
Mike Hodges, a partner at Saffery Champness, an accounting firm, said: “The taxman thinks people don’t think about anything but their taxes. But the reality is that people are focusing too much on making a living and may miss out on [July 31] deadline.”
The experts said that checking whether a payment was required was not only advisable for the self-employed. Stefanie Tremain, a partner at accounting firm Blick Rothenberg, said some may not know they need to make a down payment, including those with high levels of investment income from banks or dividends, and owners.
Anyone experiencing financial hardship should contact HM Revenue & Customs to discuss a longer-term payment plan, Tremain added.
Self-assessment taxpayers must make both annual payments on account, unless their last tax bill was less than £1,000 or they paid more than 80 per cent of the tax due for the previous year.
Each payment is half of the prior year’s tax bill, with payments due before midnight on January 31 and July 31. If there are still taxes to be paid after the payments on account are made, there will be an equalization payment that is due before midnight on January 31 in the following year.
—————————————————-