Millions of small business owners warned over the risk of fines – London Business News | Londonlovesbusiness.com

One of the most important tax deadlines of the year is looming for millions of self-employed workers.

With the second ‘payment on account’ deadline of 31 July rapidly approaching, those yet to pay their bills face the risk of “hefty fines and aggressive interest rates”, says Qdos, a tax insurance provider for the self-employed.

‘Payments on account’ are how most self-employed pay their tax bills. The system splits a tax bill into two installments, with two deadlines each financial year.

The first installment (due by midnight on 31 January each year) is referred to as a ‘balancing payment’, and covers what’s left of the previous year’s tax bill. The second is an advance payment for the next year’s tax bill and is due by 31 July.

With the deadline looming, it’s essential you pay your bill on time. Not doing so can be costly, with HMRC charging up to three late payment penalties, each charged at 5% of the outstanding tax – and accruing interest at 7.75% if they fall overdue.

Worse, failure to make a payment on time could also give HMRC an excuse to launch a lengthy – and potentially expensive – tax investigation.

Qdos CEO, Seb Maley, said, “Payments on account’ are how the majority of the self-employed sort their tax bill out, and the system gives people a bit more flexibility around their tax affairs.

“With deadline approaching, it’s crucial that those yet to make their first ‘payment on account’ of the financial year do so on time. If you don’t, you run the risk of hefty fines and aggressive interest rates on the fine itself – and a potential HMRC enquiry into your tax affairs.

“The good news is that these scenarios are avoidable – you just have to pay on time. If your liability is difficult to calculate, or your income has changed and your bill is different from HMRC’s forecast, all is not lost.

“You’ve got up to 30 days after the deadline to contact HMRC, explain the issue and arrange a suitable payment scheme – you won’t be fined or charged any interest within that time.”