Deadline approaches to cut tax bill

Freelancers who pay their tax in two annual instalments have until the end of this month to ask the Revenue to revise their July 31 tax payment, which could slash their tax bill according to giant group plc, the contractor services provider.

Thousands of freelancers paid up to 50 per cent of their tax for the 2004/05 tax year on January 31. The remaining 50 per cent must be paid to the Revenue by the end of July.

Contractors should recalculate their tax liability prior to making the final payment advises giant group. This is because lower income for 2004/05 may mean the final amount of tax due is far lower than the original calculation.

Matthew Brown, Managing Director, giant group said: "Contractors should look at whether their actual income for the tax year corresponds to their initial calculation. This is something far too many taxpayers neglect to do but for contractors it's particularly important as earnings can vary significantly during the year and initial projections are not always accurate.

"If circumstances change the tax due for the 2004/05 tax year could be lower, which would justify a reduction in the July 31 payment on account. This can be done by letter or by sending form SA303 to Revenue & Customs."

Interest

Taxpayers that fail to meet the July 31 deadline for their second instalment will be charged interest at the Revenue's rate of 7.5 per cent. The Bank of England's interest rate is currently 4.75 per cent.

Some freelancers may not realise that Revenue & Customs interest rates are so high and could be in for an unpleasant surprise if they don't make the July 31 deadline.

Matthew Brown said: "The disparity between the rate of interest charged by HMRC and that set by the Bank of England is quite dramatic. It's money for nothing from the taxman's point of view."