Your accountant has just finished your personal tax return.
The nasty surprise is that you have an eye-watering tax bill to pay by 31 January. You were expecting to pay something. You have a vague memory of your accountant mentioning last year that you should put some money aside to cover the tax bill. But you didn't quite get around to it.
It's been an expensive year. There was that 'once in a lifetime' holiday, new iPads and phones for the kids, Christmas was expensive. You have no savings. And now this.
Accountants don't like this time. Inevitably they will be giving bad news to some of their clients and sometimes it is not well received. Their clients sometimes mention 'Joe down the pub' whose accountant always gets him a refund. How does that happen? Well if Joe is making losses every year, or buys expensive assets in his business or if he works in construction and has tax deducted at source, he may well get a refund every year.
On the other hand, if he is self employed with a growing, profitable business or has other untaxed income like a buy to let portfolio, the consequence will usually be tax. If he tips into 'higher rate' or 'additional rate' tax territory, the tax bill might be very significant indeed.
Well what's to be done? Well after the initial shock and anger...'Why me?', it's time to think practically. What can you afford to pay over the next 6 months? If you are open and honest with the taxman and present a payment plan you can stick to, generally they will strike a deal.
When you have a plan to pay this year's bill sorted, now is the time to start planing for next year. Being surprised one year is unfortunate. Being surprised the next year is just bad planning.
Talk to your accountant about how you can minimise your tax bill. Is your business structure appropriate? Can you make use of your spouse's personal allowance and lower tax thresholds more effectively? Make the changes now.
And most importantly, set some money aside every month for your next tax bill. Set up a savings account, transfer the money every month and don't touch it until your next tax bill is due.
Paying a big tax bill is never pleasant but if you are prepared and have the funds available, the pain is much reduced.
I hope your tax season has gone well. In just a couple of months it's the end of this tax year and the cycle starts again.
It's in your hands to be prepared this time...
www.base52.co.uk
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