The second instalment of tax for 1999/00 is due on 31 July so if you are planning to escape the miserable British weather and go abroad in the second half of July, you had better ensure your tax payment is sorted out before you go, warns KPMG Tax Advisers.
Sharon Linnard, Partner, KPMG Tax Advisers, said: 'In the next couple of weeks, the Inland Revenue should be issuing statements to all taxpayers who are due to make a 31 July payment. If you have not received a statement by about 20 July, and you think you should make a payment, contact your local tax office. The statement will contain details of the amount owing and incorporate a payslip which you should send with your cheque to the Inland Revenue. Do not leave this until the last moment - make sure your cheque arrives on time if you are to avoid an interest charge.'
Tax is being collected predominantly on income from self employed activities, from property rental and the higher rate tax due on dividends and other investment income. In the past, some of this tax used to be paid on 1 July and some of it on 1 December so whether taxpayers have a cashflow advantage or disadvantage depends on their sources of income. But no-one has to pay any capital gains tax until 31 January 2001.
Sharon Linnard said: 'The payments on account are based upon the tax liability (ignoring CGT) for the previous year, ie to 5 April 1999. The first instalment of this tax was due on 31 January this year. Regardless of your actual level of income during 1999/00, as long as you paid an amount equal to 50% of the tax collected on your self assessment for last year, you could not be charged interest on that instalment, even if your final tax liability for 1999/00 turned out to be higher.'
She added: 'Some people with fluctuating income anticipated in January that their tax bill for 1999/00 would be much lower than the previous year. As a result, they applied to reduce the January payment on account to a lower level. This was perfectly acceptable but it is important now to review that calculation and make sure that, with hindsight, you did not pay too little. If you did, you are already incurring interest at 8.5% per annum.'
Sharon Linnard concluded: 'If you did not reduce your payment on account at 31 January, perhaps you can do so at the end of July. With luck, you should have a good idea of what your actual income was for 1999/00 and, if it has proved to be substantially lower than the previous year, you may wish to reduce the payment on account. Bear in mind that the final date for settling your 1999/00 tax liability is 31 January 2001. If you find, after the end of July, that you have paid too much tax, all you need do is submit your self assessment return to the Inland Revenue and you will be given a repayment.'
For further information, or assistance, please speak to your usual KPMG tax contact.
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