Savings income 3112016 if higher rate liability

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Savings income31/1/2016 if higher rate liabilityDividenddueduedueNo payments on account are due if the previous years tax payable by self assessment was ≤ £1,000orif more than 80% of the taxliability for the previous year was deducted at source.Class 4 NIC is payable at the same time as the income tax on trading income.Note, the taxpayer can claim to reduce payments on account at any time before 31 January following the tax year. This would bedone if actual income tax and class 4 NIC is expected to be less than the previous year. If the claim is incorrect, penalties and interestwill be charged.The maximum penalty is the difference between the amounts actually paid on account and the amounts that should have beenpaid on account.EXAMPLE1Janice is self employed, her tax liability for 2013/14 was as follows:Total Income tax liability12,000Less tax deducted at source(1,000)Income tax payable by self assessment11,000Class 4 NIC2,00013,000For 2014/15 her total income tax liability was £14,000 with £2,000 being deducted at source. She had a class 4 NIC liability of £2,500 anda capital gains tax liability of £1,700Show how her 2014/15 liability will be settled and determine the total amount of tax to be paid on January 31, 2016.161December 2015 ExaminationsPaper F6
2Interest on tax2.1Late payments(a)Interest is charged on late payment of tax at a rate of 3.0%.For 2014/15Payment on account:Interest runs from 31/1/2015 or 31/7/2015Other payments:Interest runs from 31/1/2016(b)Interest charged is not tax deductible for individuals(c)In addition late payments of tax will attract a penalty as follows:xIf tax is paid more than one month late there will be a penalty of 5% of the amount due.xFurther penalties of 5% will be charged where tax is unpaid after six months and again twelve months.Note:The penalties only apply to the balancing payment, and not payments on account. They therefore cover incometax, Class 4 NIC and capital gains tax paid late.2.2RepaymentIf tax is repaid, HMRC pay interest at a rate of 0.5% p.a. from 31 January, or if later, the date of original payment.Interest received is not taxable for an individual.2.3Capital gains tax(a)Capital gains tax is payable on 31 January after tax year – 31 January 2016 for 2014/15.(b)There are no payments on account for capital gains tax.(c)Under self assessment, gains must be reported to the HMRC within 6 months of the end of the tax year in which the assetis sold. (ie by 5 October)3Notification of chargeabilityAn individual who receives a source of income subject to income tax or capital gains tax must notify HMRC by 5th Octoberfollowing the end of the tax year the source arose.Failure to notify HMRC will result in a standard penalty based on a percentage of tax unpaid on 31 January following the end of thetax year - see chapter 24 (VAT).

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