By: chrismear
taxes were based on your previous years income until you submited your return
When they say this, they're talking about the next tax year, 2008/2009. (And subsequent years after that.)
For your first year in business, they've got nothing to go on, so you literally don't pay anything until 2009. Then, you'll pay half of the tax in January, and the other half in July.
Unfortunately, you'll actually be paying a bit more than that, since the two payments you make during the calendar year 2009 will not only cover the income tax you've already assessed from the tax year 2007/2008; they will also include a proportion of the estimated tax for the tax year 2008/2009. This is the "based on your previous year's income until you've submitted your return" bit.
In late 2009, you'll complete your assessment for the tax year 2008/2009, and find out the true income tax you're liable for in 2008/2009. You should find that you get a repayment in January 2010, because they'll have overestimated your tax for 2008/2009, since you had such a unusually good year in 2007/2008.
It's mad, isn't it?
There may be a clever way to get around the "pay-lots-and-then-get-a-repayment" situation, but you'll have to talk to an accountant to find out.
Again, I must emphasise I don't have firsthand experience with this method of collecting taxes (which is peculiar to the self-employed), but I did read up on it when I was setting up my business.
When they say this, they're talking about the next tax year, 2008/2009. (And subsequent years after that.)
For your first year in business, they've got nothing to go on, so you literally don't pay anything until 2009. Then, you'll pay half of the tax in January, and the other half in July.
Unfortunately, you'll actually be paying a bit more than that, since the two payments you make during the calendar year 2009 will not only cover the income tax you've already assessed from the tax year 2007/2008; they will also include a proportion of the estimated tax for the tax year 2008/2009. This is the "based on your previous year's income until you've submitted your return" bit.
In late 2009, you'll complete your assessment for the tax year 2008/2009, and find out the true income tax you're liable for in 2008/2009. You should find that you get a repayment in January 2010, because they'll have overestimated your tax for 2008/2009, since you had such a unusually good year in 2007/2008.
It's mad, isn't it?
There may be a clever way to get around the "pay-lots-and-then-get-a-repayment" situation, but you'll have to talk to an accountant to find out.
Again, I must emphasise I don't have firsthand experience with this method of collecting taxes (which is peculiar to the self-employed), but I did read up on it when I was setting up my business.