I have a question about income tax if anyone would like to help?

[FruitynNutty]

2007-2008 was my 1st full year as a CM.

I had no idea what to expect to pay tax wise.
Since getting my bill through I have been in a bit of a panic

Fair enough I have to pay for 2007-2008 but why oh why oh why are they asking me to part pay tax for 2008-2009?

I've heard this is normal but why?
I have absolutely no idea what my income/expenditure will be by April next year.
I've managed to scrape up enough funds to pay my tax for 2007-2008. There's absolutely no way I can get together another £423.90 by 31st Jan

I'm trying and failing miserably to get together enough spare cash to save up for when I go on maternity leave in April to pay the mortgage while I'm out of work. I can't believe I've also got to pay this extra money to the IR.

So, I either pay my mortgage/bills or I pay this extra tax I don't suppose the IR will be understanding and wait until I've completed my tax return for 2008-2009 will they?
Do I really absolutely have to pay this extra amount?

they are putting you into the payment on account system where you pay in instalments based on estimates during that tax year. more info here on what to do if you can't pay it/want it adjusted

link

Thank you hollyivy I'll call them and see what they say.
Perhaps they can wait for their extra money. I hope so, not sure how they'll get it otherwise
I'd be very rich if I was able to save up that sort of money on my wage!

presumably you've got some more detailed info to back up your earnings for the year (sounsd like you have) so have that handy so you can write a letter.

and keep me posted - happy to help out if I can

Hi FruitynNutty, I do feel for you but what
you have to remember is that if you were PAYE you would have been paying tax every month as you went along. It is a shame you were not able to get some good accounting advice before you embarked on being self-employed. A good accountant would have explained all the implications of being self-employed to you including the fact that you would have to pay in January, 10 months after the tax year end, any tax due plus one half of your payment on account for the next tax year, with the second installment the following July 31st. If you worked the whole of 2007/2008 tax year, then you have in fact had 22 months in which you could have saved up for tax. The Tax man is not very accommodating really, he says ignorance is no excuse; he will apply a 5% fine on any outstanding amount at 31st January 2009 and even if you do come to some arrangement, do expect that the longer you take to pay him, the more interest he will add on.

I think you may have to open up a savings account and put a regular sum aside every week/month in order to avoid this same problem next January 2010.

Good luck, I am sure that you will be able to come to some arrangement. I think that the tax man is used to a lot of newly self-employed people not understanding the system the first time they get a tax demand but be very careful, he may not be so understanding in January 2010.

You can opt out of the pre payment plan.

Ring and then write to them following the phone conversation, don't forget to state the information you were given and by who when you called.

Thanks AdventCandlewax
Hopefully he will be understanding. I just didn't expect to have to pay more than 1 year's tax. I was amazed I managed to save enough to cover my (what I thought was) huge tax bill! Then I find out I've got to pay part of the following year too I now know this is normal, I just wasn't expecting it.

So, now I've got to work out how on earth I'm going to scrape together this extra £423.90.
Maybe I will have to go back to work the day after I give birth as I've got to use money I will (hopefully) have saved for paying bills/mortgage for 4 weeks maternity leave on blardy tax!
I've learnt my lesson, never assume anything! There will always be something to come up behind and bite you!

I'm going to call them tomorrow and see what they say.

Do mention you will be taking maternity leave - it will affect next years tax

the rule is if our tax liability is over £500 you have to make 2 payments on account for the next year in jan and july. If your income will be lower you can apply to reduce the payments on account(to less or nil) but if you reduce to nil and you have a liability HMRC will make you pay interest(sorry to have to tell you that) If you cannot make the whole amount they are asking for then they will make a payment plan with you. They'd rather have something than nothing.

Make sure you do your 2008/09 return BEFORE 31 July 2009 and then if you don't owe anything you'll be ok.

But, the way i'd do it since we only have 3/4 months left of this tax year is to work out your income and expenses to date and predict forward from now to 5th April and see what your liability is likely to be. Then you can more accurately reduce your payments on account for 2008/09. If you aren't taken maternity leave til April I hate to say it but that's tax year 2009/10 so it may not affect the payments on account we're talking about but the ones you will make in Jan and July 2010.

I have been self employed for a number of years and every month when I pay myself I take 30% off and save it. when I was being paid cash I had a piggy bank which literally third of everything I earned went into. other wise I would never have managed to pay my tax bill.This is what my expensive ( but worth his weight in gold)acountant told me to do.
The best thing about it is that we usually have some left over for broken cars or new dishwashers at the end of the year when we've paid the tax bill.

I do hope you manage to sort something out and the tax man will listen.I think being self employed is always a worry and no matter how organised I've been the tax bill always worries me.
Lets hope you speak to someone understanding at the tax office

Susiey A Third!!!
I couldn't survive if I put away a third every month. I never have anything spare as it is.

I haven't had a chance to call the IR today. Rushed off my feet with the children!

I could probably spare about £20 per month, but that means going without coffee with friends/family at the weekend - I'll smuggle a flask into Starbucks

I'm currently signed up with Sitters baby sitting agency but can only make it to Saturday jobs.
I've been putting aside the money which has helped me to raise the cash for the tax for 2007-2008. I just hope I can raise enough from Sitters work to cover the extra money they want. I was supposed to be saving this money for when I'm on Mat leave which I might not be able to go on now.

I know everyone has to pay tax and I should stop moaning about it but if it was just the tax for the year then I could just about manage.

Thanks for all your responses. You've all been very helpful