Every month Debbie Story answers your questions in the local Grapevine magazine.
31 July 2012 is the deadline for the self-employed to pay their second ‘payment on account’ of income tax and the renewal of Tax Credits. Therefore this month the Q & A’s are dedicated to answering your urgent questions on this subject.
Q: My business is not as profitable this year and I am told that I can ask for payments on account to be reduced. How do I get them reduced?
A: For the self-employed, income tax on earnings during the year ended 5 April 2012 is not due until 31 January 2013. Due to the significant time lag between earning the money and paying the tax, HMRC require payments to be made on account which are based on the tax due in the previous year, 50% by 31 January 2012 and 50% coming due on 31 July 2012.
If you know that your income for the current year will be lower than last year’s, you can ask to reduce your payments on account. But:
You can reduce your payments on account in any of the following ways:
Q: What happens if I don’t renew my tax credits before the deadline of 31 July 2012?
A: If you’ve been sent an Annual Declaration and don’t renew, the following will happen:
Q: I haven’t yet received a tax credits renewal pack?
A: If you haven’t yet received your renewal pack, you should immediately contact the Tax Credit Helpline on 0345 300 3900 and have your national insurance number to hand. The Tax Credit Helpline will send you the renewal forms you need. You’ll then have 30 days to renew or report a change in circumstances. Your payments will carry on in the meantime.
Q: I work 29 hours a week. Is it correct that I’ll get more tax credits if I worked 30 hours?
A: You get more tax credits if you work over 30 hours per week, as you get the full time element. If you work 16 hours a week then you get part time only. There is no added increment in-between 16 and 30 hours. Of course, tax credits reduce as your income increases, however the extra hour to take you up to 30 is more likely to increase your benefit. If you do change your hours, you must contact the Tax Credit Office as soon as possible.