Right then, it is now February, and if you’ve all done as HMRC require, all your tax returns for the year to 5 April 2010 are now submitted and the tax man knows how much tax to collect from you.
People can sometimes find it difficult to get their hands on funds to pay their tax bill due by 31 January on time, and can worry about impending penalties and fines. Whilst there are some financial disadvantages to paying late, it’s not the end of the world so long as you are aware of what charges are applied and when.
A large number of you will have been told by your accountants or the HMRC online software, that you do have an amount to pay by 31 January 2011, and possibly an amount to pay by 31 July 2011.
The amount that you have to pay by 31 January is most likely to be made up of two figures: a balancing payment of tax due for 5 April 2010, and the first payment on account towards tax due for 5 April 2011.
The amount due by 31 July 2011 (if applicable) will be the second payment on account towards tax due for 5 April 2011.
A surcharge of 5% will be applied to any part of the balancing amount due for 5 April 2010 that is still outstanding at 28 February 2011. A further 5% surcharge will be applied to any outstanding amount at 31 July 2011.
This 5% surcharge does not apply to the first payment on account element of the total amount due. Therefore, if you are finding it difficult to get together enough money to cover the whole amount payable, at least try to pay enough by 28 February to cover the balancing amount, to help avoid this surcharge.
It is worth pointing out here, that if you owe tax from earlier years, then any payment you make now will be allocated against the oldest debt first, leaving this current tax bill outstanding and surcharges will be applied.
Interest starts to accrue on all outstanding amounts from 1 February, including the payment on account element. Interest is applied on a daily basis until the debt is cleared.
Balancing payment for 2010 £1,500
First payment on account for 2011 £2,000
Total payable by 31 January 2011 £3,500
If nothing is paid off before 28 February 2011 then a surcharge of £75 will be applied, being 5% of the £1,500, but interest will start accruing on the £3,500 from 1 February 2011.
This post was compiled by Deborah Bradley on behalf of the Balance Team.
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