How to budget for paying tax
How to manage your finances so that you meet tax deadlines
Certain things to bear in mind when tax deadlines are on the horizon are:
1) Keep all necessary paperwork organised and make sure to keep all paperwork even after the tax years passed as HMRC can put you under a tax investigation at any point reaching as far back as 20 years.
2) Make sure to plan ahead with your finances so you don’t fall short when deadlines arrive.
3) Be conscious of when the deadlines are arriving and what state your finances are in.
It’s important that you know how much tax you’re due to pay as this helps you to plan your finances around how much is due.
HMRC offer a ‘Budget payment plan’ which allows you to decide how much you wish to pay overtime and also allows you to stop payments for up to 6 months, this option needs to be set up with HMRC for payments through direct debit and when payments are made they need to be regular.
If you would rather not use the HMRC’s budget payment plan then you can design your own budget plan which for e.g. could allow you to put money aside for your tax payments, the pro’s for this is that you don’t have the restrictions which HMRC place although they’re not too strict anyway. However the cons are that you need to be self motivated to keep with the budget plan.
Alternatively if you prefer to pay in one big lump sum then it’s even more crucial that you’re aware of how much tax you’re due to pay, how far away the deadlines are and your financial state.
Overall awareness of the deadlines and you’re own particular financial situation can guide you to making a budgeting plan for tax returns. It’s also worth bearing in mind that just a bit of planning ahead can save you from unnecessary fines and penalties from HMRC.
By Mohammad Khan at Tax Affinity Accountants.
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