Practicalities of self assessment

[HB2016]

Im sure this has been asked before, for the life of me I cant find what i need by searching!

Im fairly new to this too so apologies if its frustrating to read yet another dumb ass post

How to do plan for your self assessment tax e.g. what percentage to save of your weekly invoice and where do you put it

Yes my accountant should help me with this but they talk accountancy language and i just want to know how to do this practically. Based on the max I can earn in a year. All my googling just tells me about filling in the self assessment form

Im considering just setting up a direct debit to HMRC - any experience with this? Other than risk of over paying?

Some advise and tips would be fantastically useful and prob save my ass and my stress

[ladymuck]

Yes, you can set up a DD with HMRC but that won't collect a set monthly (for example) payment like you do for your gas bill. The set up isn't totally automated. I seem to recall that I have to manually request the DD each time, it doesn't flow through from the SAR, so other than doing it to stop you forgetting to pay, there's little benefit over scheduling a bank transfer.

General rule of thumb is to put aside 7.5% each time you pay a dividend.

[HB2016]

Thanks

Thank you

So If i took out a dividend, 7.5% of that should be saved for paying hmrc?

Brill thank you

[SueEllen]

Thank you

So If i took out a dividend, 7.5% of that should be saved for paying hmrc?

Brill thank you

Yep.

[EinsteinTax]

The other way of planning for the tax is to plan the total dividends you anticipate taking for the year, work out the tax and then just put a lump sum aside.

For the 17/18 year, if your strategy is an £8k salary plus dividends to take you to the £45k higher rate threshold then putting aside £2,200 should cover the tax bill.

Your accountant should be able to give you a more detailed projection based on your exact personal circumstances.

[DeadEyedJacks]

Yes, you can set up a DD with HMRC but that won't collect a set monthly (for example) payment like you do for your gas bill. The set up isn't totally automated. I seem to recall that I have to manually request the DD each time, it doesn't flow through from the SAR, so other than doing it to stop you forgetting to pay, there's little benefit over scheduling a bank transfer.

General rule of thumb is to put aside 7.5% each time you pay a dividend.

With the Direct Debit HMRC take the money from your account, with Bank Transfer you send money to their account.

Bank transfers have the risk that you inadvertently send to wrong place or it doesn't get allocated to your tax account due to wrong / missing ref, etc.

To my mind the direct debit is safer and gives more certainty that HMRC allocates the payment appropriately.

[northernladyuk]

Yes, you can set up a DD with HMRC but that won't collect a set monthly (for example) payment like you do for your gas bill. The set up isn't totally automated. I seem to recall that I have to manually request the DD each time, it doesn't flow through from the SAR, so other than doing it to stop you forgetting to pay, there's little benefit over scheduling a bank transfer.

General rule of thumb is to put aside 7.5% each time you pay a dividend.

That is up to the higher rate threshold isn't it? (I haven't contracted in UK for 3 years so things may have moved on.)

[TheCyclingProgrammer]

I use personal budgeting software (YNAB, specifically). Every time I pay a quarterly dividend, I immediately put an appropriate amount in my "Taxes" budget and the rest goes into "Money for budgeting". This means come January I have enough for my first payment on account plus any balancing charge (though I don't normally have a balancing charge as I always know what my tax bill will be and always reduce my payments on account if I go into the higher rate band one year as a one off).