Provisional and Terminal tax are both types of Income Tax. If at the end of the financial year it turns out that you've overpaid your tax - that is what you have paid in provisional tax through the year exceeds the tax owing at the end of the year, the excess will be refunded to you (unless you have other debts with Inland Revenue or you would like Inland Revenue to use it to pay another tax liability).
If the provisional tax payments you've made don't cover your tax owing, the balance is called "terminal tax" and you must pay it by the terminal tax due date.
When you'll need to pay terminal tax is based on two things:
- your balance date; and
- whether you file your returns yourself or use a Tax Agent (e.g. RightWay) who has an extension of time arrangement with Inland Revenue to file your returns.
If you have the standard balance date of 31 March, your terminal tax is due:
- the first 7 February after balance date if your return is not prepared or filed by RightWay with an extension of time to file your return, or
- the second 7 April after balance date if your return is prepared or filed by RightWay with an extension of time to file your return.
When working with RightWay we'll help ensure that you pay the right amount of provisional tax to cover your income tax so you aren't faced with a big terminal tax bill at the end of the year. If you have any questions please contact your RightWay accountant, email email@example.com or call 0800 55 024