Self-employed warned of difficult year
While the UK's self-employed taxpayers are finalising their tax returns for the 31 December deadline, they should begin planning for a tough year ahead.
The warning comes from the London Society of Chartered Accountants, which believes changes to national insurance contributions, combined with the system of interim tax payments could lead to some unpleasant surprises.
‘It’s essential for many self-employed people to plan ahead to meet these bills,’ said the LSCA’s Kenneth Crofton Martin.
‘The problem stems from the fact that interim payments are based on the previous year’s tax liabilty. When the final tax liability for 2000/01 is established, not only has the balance of any tax to be paid, but the higher total will set the level of interim payments for the next year,’ he said.
The LSCA has calculated a trader earning £28,000 currently would pay tax and national insurance contributions of about £6,100 for 1999/2000. Most of this will have already been paid in interim payments. Next year the same trader will be asked to find an extra £750 in January 202 and £250 in July 2002.
‘Viewed against existing levels of payment on account in January and July of around £3,000 this is a hefty rise. Some people are going to find 2002 a very difficult year in terms of cash flow and need to tighten their belts now.’
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