Gross Income Needed to Net Differing Amounts

"Ronald Raygun" wrote

Yep, of course. But that ain't paid "in advance"!

For example, the POA due by 31/1/2008 was in respect of income earned during 6/4/2007-5/10/2007. That's payable around 4-10 months *after* the income was earned.

The POA due by 31/7/2008 is in respect of income earned during 6/10/2007-5/4/2008. That's also payable around 4-10 months *after* the income was earned.

So - *what part* is payable "in advance" ?

Reply to
Tim
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In what way exactly is a "negative tranch" a payment of tax? :)

My use & context was "allowing" as in "excepting". But, even if the 3rd is a repayment, it's still tax.

Is there a difference between my smiley with a nose and yours without, or are you just saving key-strokes? :----)

Reply to
Martin

It might be.

No, the POAs are not in respect of specific half year earning periods. They are, together, in anticipation of the whole year's earnings.

Ask yourself in advance of *what*. Granted, in what one might call "normal" cases, i.e. where a taxpayer earns and is paid more or less continuously throughout the year, then none of his POAs are due in advance either of the income being earned or actually being received.

But although a taxpayer may have *earned* his income throughout the tax year, he may well not actually get *paid* until the end of the tax year, or even later, and therefore at least the January POA could be due entirely before *any* of the year's income was actually available.

Santa and the Easter Bunny spend all year earning (making and stockpiling their wares), but the whole year's income pours in in just one month.

Then there's Rudolph, a true seasonal worker, who is on holiday for 11 months of the year, and does all his earning in December. Yet he still has to pay half his tax in the previous July.

Reply to
Ronald Raygun

Hey, look, it's Pinnochio!

Reply to
Ronald Raygun

"Ronald Raygun" wrote

If it looks like it's going to be, then you should apply to reduce your POA.

"Ronald Raygun" wrote

Yep - each is in respect of half of the expected year's earnings.

"Ronald Raygun" wrote

Indeed!

"Ronald Raygun" wrote

Eh? - Nope! His July POA in respect of half the earnings for tax year

6/4/2007-5/4/2008, ie half of earnings in December 2007, is payable in July 2008. That's the *following* July, not the previous one!

You'd need to have more than half the tax-year's earnings during just the last two months -- February/March -- to have any problem at all....

Reply to
Tim

Quite so, and it is not necessarily the case that half the year's earnings are earned during the first half of the year.

Er, just testing. :-) Actually, the first POA in respect of 2007/8 is due in January 2008, not July 2008. That doesn't leave much time, and you know what these payroll bureaux are like, especially if they're not used to dealing with non-PAYE bods; he may not get his money before the end of January.

Agreed (subject to delay effects affecting December/January earnings as well), but you have to admit that it's a plausible scenario.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

But it is usually the case that at least half are earned during the first 10 months...

"Ronald Raygun" wrote

"Ronald Raygun" wrote

Yep - but only just! Troys earlier post suggests that most/all self-employed "... pay their tax in two tranches, part of it in advance." That's usually not the case.

Anyway, that's why I mentioned the bit last time which you snipped:-

Reply to
Tim
< snip >

Consider.... HR taxpayer receives 12-months' interest on his savings at end-March. Everything else is dealt with in his PAYE coding, thus the only "extra" tax due is the additional 20% on the interest.

So part of that tax is payable 2 months before the interest is received (albeit the gross interest would have to be c12k for POAs to apply).

Reply to
Martin

Sure, but in one manner of speaking, it usually *is* the case.

You'd have to interpret "in advance" relatively. For year 1 of self employment, all the tax is due about 10 months after the end of the tax year in which the income is notionally earned. Then for subsequent years it changes to being due partly 6 and partly 12 months earlier, i.e. "in advance" of when it would have been due otherwise.

If you have a low-income business, you may fall below the threshold at which POAs are required, and so for several years you could be paying 10 months after the year end. If your business gradually grows, then one year it will suddenly cross the threshold and POAs will kick in, and that year you'll get a double tax bill, by having to pay 150% of (say) 2005/6's tax in January 2007, and a further

50% 6 months later (on account for the tax due for 2006/7, which may not be computed until January 2008).
Reply to
Ronald Raygun

Does interest in fact fall into the POA regime? I suspect not.

Reply to
Ronald Raygun

"Ronald Raygun" wrote

Eh? POA is half of the tax liability for the previous tax year (excluding PAYE and anything else already paid such as 20% of interest). That tax liability *includes* the extra 20% on interest for a HRT, and so the POAs must include half each time too...

Reply to
Tim

"Ronald Raygun" wrote

No - POA's are *always* due 6 and 12 months before "10 months after the end of tax year".

It's just that in the first year of self-employment, the POA's are calculated as a half of the previous year's s/e tax, which is half of zero ... or zero.

So, POAs are *always* 10 months into the tax year & 4 months after it, and the balancing payment is *always* 10 months after the end.

;-)

Reply to
Tim

I'm always wary of people who are overly secretive.

Reply to
PeterSaxton

I'm always wary of people who are overly secretive.

What else do you expect me to tell you for the whole of the NG readers to know?

Ken

Reply to
Ken

Or do I mean "tranche".

"Even if the 3rd is a repayment, it's still tax" you say? They refund you the tax?

No wonder Peter thinks they are in a mess.

&-----)
Reply to
Troy Steadman

Yep. Extraordinary, isn't it. Next thing you know, they'll be repaying input VAT.

Now you're just showing off.... :-((((((((

Reply to
Martin

Smiley duly noted. Trust a mathematician to spot how to make circumstances fit the model.

POAs are due but happen to be zero. Very nice.

Reply to
Ronald Raygun

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