If you file your Tax Return on-line on or before the 30 December (note it is the 30 not the 31 December) and the amount of tax you owe is less than £3,000 you can have your tax collected through your PAYE code, rather than paying it all in one lump sum payment on 31 January.
This has a great cash flow saving as you get to pay the tax you owe to the Taxman over a longer period. Meaning you keep hold of your cash for longer.
Note, you won’t be able to pay your tax bill through your PAYE tax code if:-
- you don’t have enough PAYE income for HMRC to collect it
- you’d pay more than 50% of your PAYE income in tax
- you’d end up paying more than twice as much tax as you normally do
David is an employed dentist earning £50,000 a year. He has income from property and has a tax payment of £1,500 to make to HMRC by 31 January.
David’s hard working accountant files David’s Tax Return on 24 December and elects to have David’s Tax collected through his PAYE code for the coming tax year.
David is delighted when he hears the newsas this delays his tax payment. By spreading his tax collection over 12 months David has more money to spare over the Christmas period. David is told by his accountant to budget for an extra tax deduction of £125 a month for the 12 months from April to March from his wages as a dentist.