July 2015 is the month in which the second 2014/15 tax year payment on account falls due. The 31 January 2015 and 31 July 2015 tax payments are, at present, based on your Tax and National Insurance liability for the tax year ended 5 April 2014.
Can the July 2015 payment be reduced?
The self-assessment tax system assumes that your 5 April 2015 tax year financial circumstances will be similar to that for the tax year ended 5 April 2014. However, for many doctors this will not be the case as private practice profits can vary significantly due to increased expenditure, or you may have ceased self-employment to trade as a company, or even made significant charitable gift aid donations during the tax year ended 5 April 2015. If your tax and National Insurance liability for the 2014/15 tax year will definitely be lower than that for 2013/14, you can apply to reduce the July 2015 tax payment on account which in turn will improve your personal cash-flow.
Dr Smith had a tax and National Insurance liability for the tax year ended 5 April 2014 of £10,000. Based on this she is due to make her 31 July 2015 tax payment on account of £5,000 i.e. 50% of the 2013/14 tax year liability.
However, due to significantly increased medical defence payments, Dr Smith has seen her private practice profits fall significantly during the tax year ended 5 April 2015 and she estimates that her tax and National Insurance liability for the tax year ended 5 April 2015 to be nearer £5,000. Therefore, an application can be made to reduce the July 2015 payment on accounts to nil as £5,000 has already been paid in January 2015.
You should not reduce the July 2015 payment on account unless you are certain your calculations are accurate. Any over reduction in the tax payment on account will incur HM Revenue and customs (HMRC) interest and penalties so be careful.
A safer option would be to ensure your 2014/15 self-assessment tax return is completed prior to 31 July 2015 as then your actual 5 April 2015 tax position will be known.
Contact us today to discuss your options Jason@doctorstax.co.ukLeave a reply →