If you are expecting an annual income of more than around $200,000 from your business and you’re not paying PAYE on any salary from the business, beware of Use of Money Interest, which has now been set at 9.21%.
If your income exceeds $204,820, your tax is going to exceed $60,000, which is the threshold at which Use of Money Interest is applied.
Inland Revenue expects you to know your income for the year ended 31 March 2023 by 7 May 2023.
This is not particularly realistic for small businesses. However, if you haven’t paid enough tax by that date, you must top up the tax or face Use of Money Interest charges on short-paid tax.
What to do? Try to estimate your taxable income for the financial year. Work out your tax for the year, which is $60,000 +39% on every dollar of income in excess of $204,820. Deduct the first and second instalments of provisional tax you have already paid and pay Inland Revenue the difference.
Similarly there is a threshold for companies which is $214,285.
