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Posted Sat, 14 Oct 2023 07:31:39 GMT by Johnny62
I’m a sole trader and will be making a purchase of equipment during this financial year 2023/24. The cost of the equipment will take my profits below the tax threshold, meaning that I won’t have any tax liability for 2023/24. In tax year 2024/25 my profit should return to normal meaning that I would have tax liability. My question is, how would my tax calculation be done. Would I just have 2 payments on account to make or would there be any kind of balancing payment due. For example: 2024/25 tax due £4,000 = 2 payments on account of £2,000. Would that be all that needed to be paid.
Posted Wed, 18 Oct 2023 11:55:28 GMT by HMRC Admin 10
If you have no tax liability for 23/24, no payments on account will be generated for 24/25 and any tax to pay would then be a balancing payment to be paid in January 2026.
As you expect to have liability you can always make payments in advance.
Posted Wed, 18 Oct 2023 13:08:43 GMT by Johnny62
Thank you for your reply. So, just to clarify, if I have no payments on account for 24/25 but my tax bill for that year is say £5,000 would that mean that in January 2026 I would have a balancing payment of £5,000 and then two payments on account of £2,500 each. Do the payments on account I make in 23/24 then go towards my tax bill for 25/26. I would like to complete my own self assessment going forward and am just trying to clarify this point to hopefully avoid any mistakes I might make.
Posted Fri, 20 Oct 2023 15:06:48 GMT by HMRC Admin 19
Any payments on account for 2023/24 that are not required would be adjusted when your 2023/24 return was submitted.

Any credit would remain on your account until such time you wished to claim it or for it be put towards later charges.

Thank you.

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