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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15940
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I have a large tax bill for 2012/13 based on earnings,

Customer Question

Hi

I have a large tax bill for 2012/13 based on earnings, but I won't for 2013/14. However I did sell my business in early 2013/14 and even with Entrepreneurs Relief will need to pay a large amont of Capital Gains Tax. What I can't find out is whether I still have to make the normal payments on account for 2013/14, because although ultimately it will be due, it is on Capital Gains and not income.

I have read that payments on account are not normally due on Capital Gains Tax, but does that mean I can cancel the payments on account for next year that would otherwise be payable.

I hope that makes sense and thank you for your consideration.

Darrin
Submitted: 3 years ago.
Category: Tax
Expert:  TonyTax replied 3 years ago.
Hi.

You can reduce your payments on account of income tax and Class 4 NIC from the default levels to a more appropriate level, £0 if necessary. You don't need to take account of a Capital Gains Tax liability. You should try to work out what your income tax and Class 4 NIC liability for 2013/14 will be if anything as any part of a payment on account which is ultimately shown to have been payable all along will have interest added to it at 3% per annum.

The fact that you will have CGT to pay for 2013/14 does not preclude you from reducing your tax and NIC payments on account without regard to capital gains. If you had completed your tax return for 2012/13 early in 2013/14, you may not have known at that stage that you would have a capital gain for 2013/14 so you would not take account of potential gains when applying to reduce your payments on account. You may not have sold your business until 5 April 2014 by which time the first payment on account date for that year had passed. Take a look at the 5th question here for confirmation.

I hope this helps but let me know if you have any further questions.
Expert:  TonyTax replied 3 years ago.
Hi again.

I can see that you have yet to read my answer to your question. If you need further clarification, please feel free to ask for it. If not, would you kindly rate my answer so that I am paid for my work. Thanks.