Payment on Account

[chirpychippy]

I really struggle with this calculation used by the HMRC.

Year 24 - 25 I claimed on the advice of my accountant 80% of the cost of a van purchase which reduced my liability to £1100.

Year 25-26 my profit was considerably higher than forecasted based on my previous years profit.

I dont understand how the hmrc can create back dated tax because the forecast was wrong. I feel like im being penalised for buying a van and claiming for it.

At this point in time im going to put my January 27 tax bill on for stage payments, because I think it takes the p1ss.

 

[Murdochcat]

Ask your accountant

 

[chirpychippy]

Ask your accountant

I did, he said that's just the way it is...

 

[Murdochcat]

every month I would work out my profit, deduct £1000 and then put aside 35% for taxes

Then pay the 6 monthly bills as requested by HMRC

 

[chirpychippy]

I have the capital to pay it out right, that's not my point.

I bought a van for work, it cost £24000. This purchase severely impacted my cash flow. I claimed 80% of it to give time for my cash flow to recover, to then be hit with a huge tax bill which is very close to the 80% I claimed.

The reason, I recorded record profits in year 25/26, but because I claimed for the van in 24/25 it drastically reduced my liability therefore making my forecast for 25/26 wrong.

So now I have to pay it back and pay it forwards and pay my liability for my profits.

PAYE pay tax on what they earn, not on what they might earn.

 

[aveatry]

But won't it all right itself once you submit your tax return, you won't have as much to pay in January due to what you paid on account.

 

[securespark]

I've never understood how they work.

For several consecutive years, they have told me they owe me £XXX and sent me a cheque, then the next year told me I owe them an almost identical amount.

Then they decided a couple of years ago that I owed them a similar amount from the years 12/13.

And how is it you've suddenly decided over a decade later that I owe you a substantial 3 figure sum and you want it all right now?

 

[Dec27]

I have the capital to pay it out right, that's not my point.

I bought a van for work, it cost £24000. This purchase severely impacted my cash flow. I claimed 80% of it to give time for my cash flow to recover, to then be hit with a huge tax bill which is very close to the 80% I claimed.

The reason, I recorded record profits in year 25/26, but because I claimed for the van in 24/25 it drastically reduced my liability therefore making my forecast for 25/26 wrong.

So now I have to pay it back and pay it forwards and pay my liability for my profits.

PAYE pay tax on what they earn, not on what they might earn.

Until Covid I paid approx the same amounts every year. Covid was less obviously. The tax year after was my most profitable ever, I had a massive shock in January. The about estimated was 3x what I expected on going.

The year after I got a nice refund. The system isn’t perfect. But it works both ways too

 

[chirpychippy]

But won't it all right itself once you submit your tax return, you won't have as much to pay in January due to what you paid on account.

This is my recent tax return, my payment on account is due Jan 2027, at the princely sum of £11000 with the balance due July 2027.

I may have to fill out one of those forms "i havent earnt what your guessing forms" and take some long holidays prior to Jan 2027, otherwise it won't get corrected until April 2027......

 

[aveatry]

This is probably what MTD is all about, soon enough it be so you are paying your tax 4 times a year. Then it will be 12.