Depending on your situation, you might be able to spread the tax over the next tax year.
This is a good solution to those that complement their employed income with a small side gig. If the total tax due on your self-employed profits is less than £3,000 you can ask HMRC to collect this through your employed position. There are a couple of caveats to this, first you must be employed and be enrolled on a Pay As You Earn (PAYE) scheme. Second, you need to file your tax return before 31 December.
HMRC have something called a Budget Payment Plan, which can be used to spread the cost over the tax year. As you would expect there are a few caveats to this:
- Your total tax owed is less than £30,000
- You have no other debts or payment plans in place with HMRC, and
- Your tax return filings are up to date
The only other consideration is you must apply for a payment plan within 60 days of filing your return.
Most of our clients are often able to settle their tax bill out of savings based on what we’ve advised them to set aside. Depending on the industry you work in and the level of expenses you incur we advise you should set aside between 15% and 20% of your Net Fee Income – not including VAT (if you’re registered).
If you find yourself in this situation, please do consider becoming a client of Self-Assessment Scotland where we can ensure the right amount of tax is being declared and we can look at what options you have in terms of spreading the cost.