Who takes the interest on income tax paid PAYE?
An employer would take the tax every week or month so who keeps the interest on this money?
Answer:
the employer keeps the interest
normally tax deducted from an employee one month has to be paid over to the inland revenue by the 19th of the following month therefore earning interest for the employer until the 19th
you keep it
The tax man if the employer is working to the rules.
He should be paying your tax and stamp regularly and is normally checked once a year to make sure this happens.
Being self employed isn't that much fun.
If you are not careful it is easy to get in trouble and don't forget when you stop you still have a years outstanding tax to pay.
The employer passes it on to the tax man as he collects it. You don't pay all your tax at the end of the year, you pay some on account and the balence at the end of the year.
In practical terms, there is no interest earned at all on taxes paid, as taxes recieved by the Inland revenue are not put in the bank to earn interest, they are used for the purpsoe in which the tax is collected for in the first place - to run the country.
The reason the Inland Revenue charge interest on unpaid taxes due to them, is because you would have had use of the money at a time when it should have been due to them, so the interest sort of compensates the IR, just like the IR pay interest to taxpayers when repaying them overpaid tax.
You shouldn't be paying all your tax at the end of the year. You should recieve a demand by HMIT for an estimated calculation of tax based on your previous year's earnings, at the begining and middle of the year; and a final tax demand or repayment after the 31st of January following your self assessed declared income. Have a word with your accountant, otherwise you might find yourself paying HMIT that interest you think you are earning.
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