As well as being in full-time employment, I run a small craft business in my spare time at weekends and in the evenings. I often struggle to pay my tax bill in January in one lump sum, and wondered if there are any alternative ways that my tax can be collected, as I am finding this particularly difficult after the expense of Christmas.
Yes, here are two alternative ways of paying your tax bill as a single lump sum:
- Budget Payment Plan: this option is available for self-assessment tax payers. It involves setting up a direct debit to HMRC, whereby you pay a fixed amount of tax each month. If the Budget Payment Plan does not cover the whole tax liability, you simply pay the difference by setting up another direct debit.
- Coding out: this means that your tax code is adjusted to allow for the collection of tax through your wages up to certain limits, currently £3,000. Doing this effectively collects larger amounts of tax than would be collected during the year under a standard tax code.
You will find a ‘coding out’ tick box on both the online and paper versions of the self-assessment form. This needs to be ticked and submitted to HMRC by 31st October for paper returns and 30th December for online returns.
The current coding out limit of £3,000 is going to increase for people earning £30,000 or more. This change will happen from April 2015. For earners of £90,000 or more, the coding out limit is a maximum of £17,000.