By: chrismear
I may potentially have a large job coming in paying about 5x what I would normally make for the whole year - I know theres going to be a huge tax bill on that this year but my question is - do I need to save most of it to pay my tax bill for the next year then wait for a rebate a year later or will the fact I've only been in business a few months mean I wont get an estimated bill for a couple of years?
I might be completely out of the loop on this, but I don't think there is any 'estimated tax bill'. At the end of this tax year (2007/2008), you will simply fill in a self-assessment tax return, where you will have to state the profit that your business made in that year. You are then liable for income tax on that profit. So, if you make a huge amount of money this year, then you're liable for tax on it.
As I understand it, there's no way to 'offset' this year's profit against future low income or losses. (The only thing you can do is set past years' losses against this year's profit.)
However, in pure practical terms you might not actually have to pay this tax for a while. The current tax year ends in April 2008; the deadline for submitting your tax return for that year is something like December 2008 or January 2009, and then you make your payments after that.
Like I say, I might be wrong on this one, because my first-hand experience is with corporation taxes and doing self-assessment as an employee, not with doing self-assessment as a self-employed person. But, if you're not planning on getting an accountant's advice, it would probably be safer to assume that all of the tax on this year's extra-large income will turn up in this tax year, and to put aside the appropriate amount accordingly. As Abiezer says, though, it's probably worth talking to someone who's familiar with this.
I might be completely out of the loop on this, but I don't think there is any 'estimated tax bill'. At the end of this tax year (2007/2008), you will simply fill in a self-assessment tax return, where you will have to state the profit that your business made in that year. You are then liable for income tax on that profit. So, if you make a huge amount of money this year, then you're liable for tax on it.
As I understand it, there's no way to 'offset' this year's profit against future low income or losses. (The only thing you can do is set past years' losses against this year's profit.)
However, in pure practical terms you might not actually have to pay this tax for a while. The current tax year ends in April 2008; the deadline for submitting your tax return for that year is something like December 2008 or January 2009, and then you make your payments after that.
Like I say, I might be wrong on this one, because my first-hand experience is with corporation taxes and doing self-assessment as an employee, not with doing self-assessment as a self-employed person. But, if you're not planning on getting an accountant's advice, it would probably be safer to assume that all of the tax on this year's extra-large income will turn up in this tax year, and to put aside the appropriate amount accordingly. As Abiezer says, though, it's probably worth talking to someone who's familiar with this.