Tuesday, 31 January 2012

Taxing times.

The tax is done for another year. This must be how sheep feel on the way back from the shearing house. Fleeced.

I didn't leave it to the very last day but it was close. There have been noises from the tax office about all we terrible people who wait until the last possible moment, as if that's not entirely their own fault.

Firstly, they will charge a penalty plus interest if I pay late. There is nothing at all in it for me if I pay early.

Secondly, and this is the big one, they also want next year's tax this year. They call it 'tax on account' and while it is possible for me to reduce those payments on account, it has to be done carefully.

Reduce them too much and I'd get fined. Yes, really, they would fine me for not paying tax I don't actually owe yet. If I leave them too high, then I'm seriously out of pocket at least until the next tax return.

So I need to make a reliable projection of what I'm likely to earn in the next tax year, which ends in April. If I did this in July I'd have to project the likely income for ten months. If I do it at the end of January I only have to guess what I might make in February and March. If it wasn't for tax-on-account I'd be able to fill out the form on 6th April every year. The money still wouldn't be due until the following January but the form would be done. Under the current rules, only an idiot would do that.

As it is, I will make absolutely bugger all in the next two months. Even if I get a contract tomorrow, it can't be completed, reported, billed and paid before April. Well - it won't be, put it that way, or I'd get fined for not paying tax I don't owe on income I haven't had yet.

Books can't give me a surprise boost. Even if they suddenly sell like hot cakes I won't see a return for three months. Nothing significant will come from there before April either. If that did happen I would simply buy in stock before April to make that projected tax liability match what I said it was.

Apparently some tens of thousands of small businesses will be filing returns on the very last day. I am not surprised. There is no benefit in completing the form early and getting that future-tax liability wrong can be expensive. If you earn more than you said you would, then rather than just saying 'thanks' for the extra tax, the taxman will treat you as a criminal. So you either stop bothering or you buy in stock you don't really need to make the taxman's figures add up.

I'm still looking for a job. Today I saw a microbiology job, really it's a technician job but it's easy, pays well enough and is close. It's also a one-year contract which is ideal. When you're over fifty, nobody wants you because you're just getting into the job and it's retirement time. I can't blame them - if you're going to the trouble of training someone, then someone who will stay for 20 years is a better investment than someone who will only have 10 left in them.

This, plus all the pension stuff, doesn't apply on a short contract. So I'm not at a disadvantage compared to a younger applicant. I also need no training, in fact I've been training people to do the same kind of job.

I don't want another career so that's also useful. I just need to ride out the recession until everyone else has made enough money to afford my expensive services again. If I could, I'd sleep through it.

There's still the submissions-editor job. Last I heard, they had whittled it down to the last few candidates and as I haven't had the 'get lost' letter yet, there is still hope. That's all online, so I can do that as well.

None of this will prevent me having to fill out another form next year. Even the small amount the books make will have to be accounted for, the editor job counts as freelance and if I do get a contract I'll do it at night and at weekends. I'm also looking for writing work, so if you know anyone who wants some advertising copy, I am entirely without morals or scruples and will spin your product to the stars. Especially if it's something the Righteous disapprove of.

There is, nonetheless, one big attraction in going back to being an employee rather than trying to build a business..

They don't have to pay tax in advance.


Bill Sticker said...

Demanding money you haven't been paid yet?  Are the UK tax people working out of some bizarre self help book?  Something with a title like "How to truly fuck an economy in three easy lessons".

I thank the gods of inspiration for the good judgement Mrs S and I showed in moving to Canada.

Legiron said...

The UK tax people seem determined to shut down every small business in the country.

The Poet Laura-eate said...

Luckily I've never yet had to fill one out. They sound horrendous. Not to mention a complete rip-off. And what if someone less intelligent than you is filling one in and their guesswork about projected earnings is way out of the ball park. Do they get a massive fine for simply having a lower IQ?

Legiron said...

 The online one isn't too bad once you learn to have everything ready before you start.  Well, my accounts are simple, as a sole trader. I don't bother claiming anything for using an office in my house, for broadband or anything like that because working out how much heat/light/internet applies to work is more trouble than it's worth. I also have no business vehicles or depreciating capital items so it only takes an hour to finish the form.

I'd do it in April if it wasn't for this 'tax on account'. My income is variable and random. I might make ten grand on a project that takes six weeks, I might then have no other income for months. I don't know when the projects will come so I can't realistically project my income more than a month or two ahead.

At the end of January I can be confident that if there is no project running, there'll be no more income that tax-year. If one was proposed tomorrow it would take a couple of weeks of meetings, then ordering in the materials, doing the project, writing it up and sending the invoice. By the time all that's done it will be definitely after April 5th so for this year, I know exactly how much earnings I've made (not very much).

If I were to get a project tomorrow that they wanted done by the end of February and they wanted to pay me so it was off their books by April 5th, that would pose a problem because it would mean I'd set the payment on account too low. Yes, they would fine me for that so I would insist the company send the cheque on April 5th so it's off their books but not on mine. Or refuse the project, meaning the taxman won't get his 30% but also won't be able to fine me. For a short project like that, the fine could well be higher than the amount I'd make.

Tax on account forces us to skirt the deadline. If it wasn't for that we could have those forms in in plenty of time.

So yes, if someone underestimated their income because they weren't savvy enough to work it out, they would indeed be penalised for not being too clever.

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