Terminal Tax vs Provisional Tax.
What's the Difference?
"Terminal tax" and "provisional tax" get mixed up all the time, even by business owners who are otherwise on top of their numbers. If you've looked at your tax bill and wondered what's actually going on, you're not alone, here's the simple version.
Terminal tax
This is your final tax bill for the year. It's the wash-up on the profit you made in the previous financial year. To work it out, we take your total income tax owing for the year and subtract any provisional tax you've already paid. Whatever's left is what's due.
Provisional tax
Provisional tax works differently. Instead of one lump sum, it's your income tax paid in advance, in installments, throughout the year, based on the profit you're expected to make in the current financial year. If you're using the standard calculation method, this is usually based on last year's tax bill plus a 5% uplift.
In short: terminal tax looks backward at what you owe, while provisional tax looks forward and chips away at it in advance.
We know tax can feel like a lot to keep track of, especially when you're busy running a business, managing a property, or working the land.
