When working as a limited company contractor you are required to complete not only a corporation tax return but you are also required to complete a self-assessment tax return. And many taxpayers in self-assessment will be due to pay their second Payment on Account towards their 2018/19 Personal Tax liability soon, but do they need to? In many cases, yes they do, but it is often worth exploring the possibility that you might not have to pay as much as expected, if anything at all.
If your taxable income is less than expected and you file your 2017/18 tax return before the July Payment on Account deadline, which is 31 July 2018, your July payment may be reduced.
For example, if you had paid £2,000 on account in January and are due to pay another £2,000 by the end of July, yet your 2017/18 tax return has a remaining liability of £1,000 after taking your January payment into consideration, this would mean if you paid £2,000 in July you have actually overpaid by £1,000.
Should your return be filed before that payment is due, HMRC will reduce your July payment to just the £1,000 actually owed.
If you do not file your return before 31 July 2018 and end up overpaying tax on account as a result, don’t worry, you still have two choices. The first is that HMRC will refund you the difference, so that the amount of tax you have overpaid is returned to you.
Alternatively the overpaid amount can be credited to your Self-Assessment account, the benefit of this is that any future taxes due will be deducted from that credit before you have to make any further payments towards your Self-Assessment tax liabilities.
If you would like your return filed before the July payment deadline please contact the PayStream Tax Team on 0161 929 6000 (option 3) or email tax@paystream.co.uk and one of our advisers will discuss this with you.