Provisional tax is a key concern for businesses. Most businesses meet their income tax liability by paying provisional tax in three instalments throughout the year. However, the current dates for payment are independent of when income is earned as they assume that income is earned evenly during the year. Feedback has confirmed this does not work well for small businesses, particularly those with fluctuating incomes and tight budgets.
The introduction of a new option for provisional tax from 1 April 2018 – the Accounting Income Method (AIM) – addresses these issues by including an option that allows businesses to pay as they go. If a business makes an accounting profit they make a payment. No profit, no payment.
“I am self employed so the time it takes me to complete returns is not enormous but time is money and any saving is a good thing”.