Saving for Your 31st of January Tax Bill
22nd October 2018
Remember last month, when the biggest worry you had was whether Debenhams was putting out its Christmas displays too early? Well, we’re deep into October now and, if you haven’t got your 2017/18 tax bill paid up yet, it’s time to get cracking. The taxman’s making a list, and he’s definitely checking it twice.
What is the deadline for 2017/18 tax returns?
The deadline for filing and paying your yearly tax return is set in stone on the 31st of January.
If you miss it, you’ll have some explaining to do – and almost certainly some penalties to pay. Almost 750,000 people made that mistake last year, and wound up choking on a minimum of £100 in fines.
You might be able to play for time with HMRC if you’re genuinely unable to pay up on time. If they think you’ve got the cash when you call them, though, you’ll have to cough it up on the spot.
Do I have to pay my bill as soon as I submit my tax return?
You don’t have to pay your tax bill at the same time you file your Self Assessment tax return, so there’s no reason not to file it now and there are several good reasons why you should:
- Avoiding the last-minute hassle in January.
- Being sure you've got time to find all the info you need so you don't over pay your tax because some paperwork is missing.
- Leaving yourself some breathing space in case of last minute problems around deadline time.
- Know how much you'll need to pay owe so you can plan around it.
- Not getting a nasty surprise from HMRC when you’ve only just finished paying for Christmas.
Knowing what you’re in for tax-wise in January is the best way not to get tripped up when the due dates comes round.
How do I know what I owe HMRC?
A lot of people get tangled up in the rules and underestimate what they’ll have to pay. Remember, it’s not just tax on your profits you’ll have to fork over.
You’ve also got National Insurance contributions to consider. Class 2 National Insurance payments are a flat £2.95 a week, so you know what to expect there. However, if you’re making profits over £8,424, you’ll be looking at Class 4 NICs of 9% on those as well. That’s all on top of the tax you’re already paying and it's usually this that catches people out - even if they've worked out and planned for the income tax due on their earnings.
Payments on account need to be factored in as well. You’re not just paying what you owe for last year; you’re also paying in advance for what they estimate you’ll owe next year, based on what you earned last year, which they then "settle" when you submit your actual figures. HMRC introduced this in an attempt to help people plan for their tax bills, but most people just find it confusing.
Knowing what you’re dealing with here is essential when it comes to saving up for the bill.
How can I save enough for my tax bill?
The trick is to remember that the cash you’re raking in over the year isn’t 100% yours. There’s a chunk of it that you’re just keeping warm for HMRC, so always keep that in mind when you’re splashing out after a payment comes in.
It can be tough to set aside some of your income each month, but if you can do it you’ll be a lot safer on the 31st of January. You might even be able to get a little planning help from your bank. A lot of them have apps with “savings plans” to help you manage your goals and check your progress.
Debts can get very expensive to pay off. You’re much better off saving toward your Self Assessment bill throughout the previous year than paying over the odds throughout the next
Can I pay my tax bill by credit card?
You’ve also got to watch out for a couple of tax pitfalls when the deadline comes. A lot of people are used to reaching for their credit cards to cover emergency bills but, the taxman’s rules changed last January.
HMRC won’t even accept personal credit card payments now. If you were counting on slapping down the plastic to cover your tax in January, you’re in for a sharp shock when the time comes.
Many people weren't aware of this change last year and then didn't have the cash available to pay on time. Missing the deadline means fines and the debt - and problem - getting bigger.
Should I get a loan to cover my tax bill?
If there’s one tax payment idea that’s worse than credit cards, then it’s taking out short-term loans. With the amount you’ll get stung when you’re paying it back, this is basically madness.
If you think you’re going to have trouble paying your tax, always talk to HMRC before knocking on a “payday loan” company’s door. You may be able to agree a payment plan with them.
Of course, if you want a Personal Tax Specialist of your own to handle all this for you, talk to RIFT. You’ll be surprised how much we can do to help when the taxman’s breathing down your neck. We can even limit the damage when you’re already facing penalties – but obviously, getting in touch before then will always be better.
RIFT are the UK’s leading tax rebate and tax return experts, so our Self Assessment service is the ideal way to solve your tax problems. We can take care of the whole process for you – and save you money into the bargain. RIFT’s expert, specialist help means you’ll never pay more tax than you owe, so phone or email to get cracking.
With our help, there’ll be nothing but mistletoe hanging over your head this Christmas.