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How to Calculate the January Tax Bill – CII R03, R06, AF1, AF5

How to Calculate the January Tax Bill – CII R03, R06, AF1, AF5

Read on to view an example that illustrates how a self-employed person would calculate the tax payment due on 31st January 2015. This is particularly useful for those studying for the CII R03, R06, AF1 and AF5 exams.

As December approaches some may be thinking more of the January tax bill that’s looming rather than whether the John Lewis Christmas ad is better than the Sainsbury’s one.

The dreaded tax payment due date - 31 January 2015The self-employed are only too familiar with the January ‘tax blues’ and the prospect of having the first payment of account to pay for the current tax year, as well as the balancing payment that’s due for the previous tax year.

Let’s look at an example:

Danny had a tax bill in 2012/13 of £14,000 and in 2013/2014 of £16,000.  Let’s estimate that his tax bill for 2014/2015 will be £20,000.

What will his tax payment be on 31st January 2015?

Firstly, he needs to pay the first payment on account for 2014/15.  This is based on 50% of the previous year’s tax bill – ie 50% of £16,000 = £8,000.

He also has to pay the balancing payment for the 2013/14 tax year.  He will have paid £14,000 on account (100% of the 2012/13 tax year) and so he’ll owe the difference between that and the £16,000 he actually owes for 2013/14.  His balancing payment will be £2,000.

To that he will need to add his Class 4 NI contributions which are paid as a percentage of annual taxable profits and also any capital gains tax that he owes on gains made in 2013/14.

All in all January can be an expensive month for the self-employed!

For more information on our resources go to:  – for R03  – for R06 – for AF1  – for AF5