At what point (and in which year) is BTL income taxed?

[gullarm]

When exactly do I pay my tax for my propertys?

I completed my self assessment tax return on 21st Jan 06 for the tax year 04/05 and made the payment.

The tax man now wants me to pay 304.65 ( plus 3.25 interest ) for the tax year 05/06, the tax year hasnt ended yet?

So surely I complete a tax return in Jan 07 for the tax year 05/06 and make the payment then, I can hardly calculate my tax for a year that hasnt ended.

I also work full time and the tax man has lowered my tax code, this hasnt happened yet but it should do when my next pay slip comes thru.

Help Im so confused?

[Tax Accountant]

When exactly do I pay my tax for my propertys?

I completed my self assessment tax return on 21st Jan 06 for the tax year 04/05 and made the payment.

The tax man now wants me to pay 304.65 ( plus 3.25 interest ) for the tax year 05/06, the tax year hasnt ended yet?

So surely I complete a tax return in Jan 07 for the tax year 05/06 and make the payment then, I can hardly calculate my tax for a year that hasnt ended.

I also work full time and the tax man has lowered my tax code, this hasnt happened yet but it should do when my next pay slip comes thru.

Help Im so confused?

If your tax for 2004-05 is above a certain figure, you are obliged to pay the same amount again on account of the tax due for the following year. The payment on account for 2005-06 is due in two equal instalments on 31 January 2006 and 31 July 2006.

When you come around to finalise your tax calculations for 2005-06 year, you will only need to make a balancing payment at 31 January 2007. On the other hand, if your tax bill for 2005-06 is less than the tax bill for 2004-05, you will be due a refund.

But them you should also bear in mind that tax on account for 2006-07 will be due on 31 January 2007 and 31 July 2007, with a balancing adjustment at 31 January 2008.

Ramnik

[gullarm]

Seems a bit unfair, Im paying tax that I may have to claim back.

And with my tax code being lowered Im pretty much assured of the tax back, surely it should be either a lower tax code or pay on account.

[Tax Accountant]

Seems a bit unfair, Im paying tax that I may have to claim back.

And with my tax code being lowered Im pretty much assured of the tax back, surely it should be either a lower tax code or pay on account.

You are paying half on account on 31 January 2006 (10 months into the tax year), the other half on 31 July 2006 (4 months after the end of the tax year), and any remaining balance on 31 January 2007 (10 months after the end of the year). This doesn't sound unfair to me.

Anyway, you have a choice to estimate your tax yourself and if you think that your overall self-assessment tax bill will be lower than the year before, you are able to make an application to reduce your payments on account to what you think your eventual tax bill will be. This will keep any overpayments / underpayments to a minimum. However, if you reduce your payments on account and the eventual tax bill is higher, you will be charged interest (even penalties if you reduce tax recklessly) on any amount you reduced unnecessarily.


Ramnik