This month sees the second 2013/14 tax year payment on account falling due. The 31 January 2014 and 31 July 2014 tax payments are currently based on your Tax and National Insurance liability for the tax year ended 5 April 2013.
Can the payment be reduced?
The system assumes that your 2013/14 tax year financial circumstances will be the same or similar to that for the tax year ended 5 April 2013. However, for many doctors this is simply not the case as private practice profits can vary significantly or you may have ceased self-employment to trade as a company or even made a one-off lump sum pension contribution during the 2013/14 tax year. If you suspect that your Tax and National Insurance liability for the 2013/14 tax year will be lower than that for 2012/13, then you can apply to reduce the July 2014 tax payment on account which could significantly improve your personal cash-flow.
Dr Foster had a Tax and National Insurance liability for the 2012/13 tax year of £12,000. Based on this he is due to make his 31 July 2014 tax payment on account of £6,000 i.e. 50% of his 2012/13 liability.
However, Dr Foster’s private practice fell significantly during the tax year ended 5 April 2014 and he estimates that his Tax and National Insurance liability for the 2013/14 tax year will be nearer £7,000. Therefore an application can be made to reduce his January and July 2014 payment on accounts to £3,500 x 2 leaving just £1,000 due by 31 July 2014 i.e. £7,000 less the £6,000 that would have already been paid in January 2014.
A word of caution
Care needs to be taken to ensure any reduction in the tax payment on account is accurate and not just done to assist your cash-flow. HM Revenue and customs (HMRC) will levy interest and penalties on any over reduced amounts.
Better still would be to ensure your 2013/14 self-assessment tax return is completed prior to 31 July 2014 as then your actual Tax position will be known.
Contact us today to discuss your options Jason@doctorstax.co.ukLeave a reply →