The new NHS contract for hospital consultants has had in many cases a negative effect on private practice profits. If you are in that position you may not have noticed an overall drop in your total income as your NHS salary will have increased, while your private practice earnings fell sharply.

So your gross income has not changed but you will be paying more tax up front as a larger proportion of your income is paid as salary and subject to PAYE. The tax due on your private practice profits is payable in two ‘on-account’ instalments on 31 January within the tax year and 31 July after the end of the tax year, with any additional tax due on the next 31 January. However the two on account tax instalments due for 2005/06 are estimated figures based on the private practice profits you made in 2004/05. So you are paying tax on the basis that your private practice profits have remained steady from 2004/05 to 2005/06 when, in fact, they may well have dropped significantly.

There is a simple solution to this problem; ask for your next tax payment on account due 31 July 2006 to be reduced to reflect the tax due on your actual self-employed profits for 2005/06. You need to estimate your profits for 2005/06 (if the actual figures are not know) and complete the form SA303 with the revised balance of tax due, taking into account the tax you have already paid on 31 January 2006. We can help you with this, but will need to know the likely level of your private practice profits for 2005/06.