Probably. The payment due on the 31 July 2007 is what is referred to as a 'Payment on Account' towards your 2006/07 tax bill. The tax due is an estimate based on the figures shown on your 2005/06 Tax Return.
For example, your tax bill for the 2005/06 tax year is £2000; this bill forms the basis of your 2006/07 'Payments on Account'. £1000 becoming due on 31 January 2007, a second payment being due on the 31 July 2007. Once your 2006/07 accounts and Tax Return have been completed and your tax liability calculated then you will either have balancing payment to make, if you income has increased, or possibly a tax refund if your income has reduced.
If you need to make a further payment for 2006/07 then this should be paid on or before the 31 January 2008. If this is not paid, in addition to any daily interest charges there would be a surcharge 5% of any unpaid tax outstanding on the 28 February 2008. Interest will continue to be charged until the tax is paid. Further surcharges amounting to 5% of the tax outstanding will then be charged at 6 monthly intervals.
It then follows that the 2007/08 'Payments on Account' are then based on the 2006/07 figures, the first due on 31 January 2008.
However, if you know that your income for 2006/07 is significantly lower than that of 2005/06 then it is possible to make a claim to reduce your 'Payments on Account' to reflect your lower income. But be warned, if you do make a claim to reduce your 'Payments on Account' and you have not paid enough tax once your Tax Return has been finalised then HMRC will charge you interest on any shortfall.
Before making any decision on the possibility of reducing your 'Payment on Account' please consult your accountant.
Have you got a topic or general tax question you want us to cover in the Q & A next issue? Then email email@example.com
The Societies of Photographers Convention and Trade Show at The Novotel London West, Hammersmith ...
You have 127 days until The Societies of Photographers Convention starting on Wednesday 22nd January 2020