Personal tax payments are generally made on 31 January and 31 July. Now is a good time to plan for that January 2024 payment. The first criteria to ensure an accurate tax bill is to have completed and filed the 2022/23 tax return. Many still, unfortunately, put off this task to the very last minute, although 3,275 tax returns were filed on Christmas Day 2022!
The tax payable can consist of 2 elements:
- A “balancing payment” for 2022/23 tax year – the total tax is calculated for the year and any “payments on account” made in January and July 2023 are deducted.
- The second element is a “payment on account” for 2023/24. This is generally 50% of the total tax bill for 2022/23.
A simple example to illustrate: –
| Total tax 2022/23 | £10000 |
| Paid on account January 2023 | (£4000) |
| Paid on account January 2023 | (£4000) |
| Payable January 2024 (balance) | £ 2000 |
| Payment on account 2023/24 (£10000 *50%) | £ 5000 |
| Total payable 31 January 2024 | £ 7000 |
It is possible to review the payment on account and, if though to be excessive based on available information, application can be made to reduce this. In such circumstances, up to date management accounts and a forecast of future trading for the rest of the year is required.
These payments can sometimes fluctuate wildly, especially if income fluctuates too. A one – off dividend can lead to a substantial balancing payment and, initially, a substantial payment on account too, although if it is clearly a one-off there is scope for reducing that on account payment.
If you would like to discuss your tax payments in more detail, or if you think the payment on account could be reduced, please contact us to review in more detail.
Contact us to discuss this in more detail and also explore leasing scenarios.
