Why do you have tax to pay on 7th April 2017
Before we get stuck in, business and self- employed people pay provisional tax which is tax paid in advance for the current or next financial year. We will explain this more in next week's blog.
What is terminal tax?
Terminal tax is the difference between what tax has been paid during the year (as provisional tax, PAYE or withholding tax), and what is actually owed. If too much was paid (eg. as provisional tax) a tax refund is due, but if too little was paid, then terminal tax must be paid.
Terminal tax is the final tax calculated at the end of each income tax year (normally 31 March).
For example a business owner has taxable income of $60,000 for the year end 31 March 2017 and has not paid any provisional tax during the year.
Taxable income $60,000
Tax payable $11,020 (residual income tax)
Less provisional tax paid $0
What date is terminal tax due?
Provided the tax payer is registered with a tax agent, Terminal Tax is payable on 7th April of the year following balance date. In the above example the business owner has $11,020 of terminal tax owing for year ending 31 March 2017, payable to the IRD on 7th April 2018.
At AgBiz Accountants we keep our clients up to date with regular tax forecasting, we emphasis the payment dates, the amounts and how they may change as business profits fluctuate. This provides certainty to business owners about the effect on their cash flow for the next 12 months for tax payments. The IRD charge penalties and interest if tax is underpaid too and our regular tax reviews help prevent this. Contact Director Tim Doyle today for a no obligation phone call or meeting on 07 823 4980 or email Tim now.
This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. You should consult your own tax, legal and accounting advisors before engaging in any transaction.