Over the last several years, I have sometimes been caught short, so to speak, when it comes to paying my tax bill. I usually have some of the money but often end up needing to pay the remainder with a credit card or agree a payment plan with them in arrears. I don't want it to be this way any more. Unfortunately, HMRC don't seem to be too flexible when it comes to taking direct debits in advance. For window cleaners, obviously the income is extremely variable and a direct debit for a fixed monthly amount does not fit the bill - especially if working on a tight budget. So I have resolved to make some changes. I have a BACS payment set up from my account to their's with my reference number included. This works fine as I've been using it for ages. What I intend to do from now on is each day, I will make a BACS payment of 15% of whatever I get paid by the customers. Although my tax rate is 20% and there's about 9% class 4 NI (+ the £2-£3 class 2 NI per week), I reckon that 15% should just about do it (perhaps a small shortfall on low expenditure years). Bear in mind that I'm paying in 15% of paid turnover. Obviously there will be a few grand expenditure each year and there is also the usual tax free allowance. 15% might be a little bit light but by rounding up to the next fiver each time I think I should just about cover it.
They may not like small, daily payments but I'm afraid that I have to do it the best way for me.
I wasn't paid much today because hardly anyone was in. I sent a BACS of £8 (only decided to round up the fivers after I sent it).
If I owed less money, I would happily put it away in an interest bearing account. However, my budget is tight and I don't trust myself to leave it there.
Any thoughts on this?