Divi tax for next year

[jonbon]

Hello All

I'm a newbie so excuse my question which might be basic for some!

My accountant has told me to pay dividend tax for next years income that I might receive (assuming I keep billing the same)! He's asked to put half for next year (2013) and full for the year that went by!

Is that normal?? Seems strange to pay tax to inland revenue on income I haven't received yet! I know it can be refunded and all...but still..better with me than them???

Cheers

Jon

[Clare@InTouch]

This is normal, it's a payment on account of next years tax. You'll need to pay another 50% in July too. These two payments then get deducted from next year's liability, and new payments on account calculated.

These can be reduced if you think your income will be less next year, just ask your accountant to make the claim for you.

[Alan @ BroomeAffinity]

These can be reduced if you think your income will be less next year, just ask your accountant to make the claim for you.

... but if you do reduce the payments and it turns out you shouldn't have, or you reduce it by more than you should, you'll be charged interest.

[captainham]

This is normal, it's a payment on account of next years tax. You'll need to pay another 50% in July too. These two payments then get deducted from next year's liability, and new payments on account calculated.

These can be reduced if you think your income will be less next year, just ask your accountant to make the claim for you.

So what's the benefit/point of paying in advance then? And I'm assuming you don't have to do this?

[Clare@InTouch]

So what's the benefit/point of paying in advance then? And I'm assuming you don't have to do this?

Yes you do. As above, you can make a claim to reduce these payments but if you do so and you lower it too much then HMRC will charge interest on the original amounts that were due.

[malvolio]

So what's the benefit/point of paying in advance then? And I'm assuming you don't have to do this?

There's no benefit to you and yes you do have to do it. If you don't you'll get charged interest on top (OK, so there is a bit of a benefit...).

But look on the bright side, pay it up now and if you don't make the same money next year you get a refund and they pay you interest...

[jonbon]

But look on the bright side, pay it up now and if you don't make the same money next year you get a refund and they pay you interest...

cool!! thanks everyone!

[Maslins]

Also, to clarify, you're never paying in advance...just less in arrears.

"Normal" outside payment on account situation is you pay all your tax a whole 10 months after the tax year's finished.

Inside payments on account you're effectively paying 50% of it 2 months before the end of the tax year (ie 1/2 the tax when you should have earned 10/12 of the income), the next 50% payable 4 months after the tax year end.

[captainham]

And just when you think you're getting the hang of all this LtdCo malarkey, something brand new comes along...I need to speed up my plans to get a proper accountant!

Only in my first year as a contractor so wasn't going to take a salary (had permie pay at start of tax year) and will only take divi's up to lower rate tax threshold (i.e., no extra tax to pay), so I think this means I don't need to worry about this for the current tax year.

Best get ringing around for a bean counter to employ...

Thanks everyone.

[northernladuk]

And just when you think you're getting the hang of all this LtdCo malarkey, something brand new comes along...I need to speed up my plans to get a proper accountant!

Only in my first year as a contractor so wasn't going to take a salary (had permie pay at start of tax year) and will only take divi's up to lower rate tax threshold (i.e., no extra tax to pay), so I think this means I don't need to worry about this for the current tax year.

Best get ringing around for a bean counter to employ...

Thanks everyone.

This isn't anything to do with the LTD marlarky this is personal tax. First golden rule is to understand what is company money and what is personal. Speed up your plans a bit more.