From April 2018, small businesses, sole traders and contractors can choose a new pay-as-you-earn option, rather than paying provisional tax in instalments several times a year.
This signals a shift in focus for accountants, freeing them up to help clients make good decisions about their finances and future direction.
What: Inland Revenue is introducing the Accounting Income Method (AIM) so your business can pay tax as you earn profit. Your accounting software will calculate how much tax to pay for each filing period — monthly or two-monthly.
When: April 2018
Why: So small businesses can pay provisional tax based on their cash flow, rather than the previous year’s earnings or estimated earnings for the current year.
“Small businesses have always disliked the uncertainty of provisional tax. They have had to pay based on what they earned last year, or based on what they think they’ll earn in the current year,” says Greg James, deputy commissioner of Inland Revenue. “Paying provisional tax as they earn profit will give them much more certainty about cash flow.”