Sole trader planning ― payments on account
Owner-Managed Businesses
Guidance
This guidance note discusses some of the planning points that can arise around payments on account.
Payments on account are essentially a part of the compliance process. However, it can be a very good time to put forward certain simple planning points. It is a natural time to communicate with clients, and they will be particularly focused on tax issues given that they have an impending payment.
Aside from talking to clients about payments on account, it is a good time to conduct a review of future profits of the trade. Other points can also be considered, such as pension contributions, business expenditure, deferring income and so on.
Often the challenge is persuading clients to think further ahead and payments on account are useful for this because the amounts due can be calculated quite far ahead.
Calculating payments on account
Cash flow can be a key consideration for sole traders. How sole traders account for their tax liabilities varies from client to client. Some sole traders will set aside money well in advance,
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