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Never use expensive IRD money

November 15, 2022

Inland Revenue has hiked its interest rate twice so far this year, with it now at just under 8 percent. 

You should never use Inland Revenue money. 

If you’re on a high income or your income suddenly jumps to a high figure, attracting tax for the year of at least $60,000, you will be liable to pay interest to Inland Revenue on any underpaid tax for the year. 

But you can do something about it. Your first option is to top up the tax to the right figure by the due date for the third instalment of provisional tax, known as P3  (for most people 7 May). If you can't get your accounts done by then, you will just have to guess your income and calculate the tax on the guess. Your next best option is to pay as soon as you can after P3. This might mean getting your accounts done early or at least getting a rough idea of your income and again taking a guess You will now incur some interest but you can minimise it by paying tax early.

If the interest bill is going to be large, you can use a tax intermediary to reduce it.

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