Self assessment tax - payment on account

[Canfordhacker]

I am filling in my first self assessment tax return for 20 years. I get to the bottom line, and proudly am within £8 of the expected bill for 2023-2024.
And then the nice people at HMRC have added 50% to the amount payable on 31st Jan because they want a payment “on account” for the 24/25 tax year.
If I just claim I won’t have any taxable income can I reduce that payment on account to zero (that facility is there), then fess up next year and just pay what’s due, or will they start to hate me?

These are one off gains on which I accept tax will be due, rather than income. Obvs not seeking financial advice, just hive learnings

 

[Fromtherough]

You can elect to reduce your payments on account. But if the tax ends up being due or you reduce by too much you will be charged interest.

 

[GreiginFife]

I am filling in my first self assessment tax return for 20 years. I get to the bottom line, and proudly am within £8 of the expected bill for 2023-2024.
And then the nice people at HMRC have added 50% to the amount payable on 31st Jan because they want a payment “on account” for the 24/25 tax year.
If I just claim I won’t have any taxable income can I reduce that payment on account to zero (that facility is there), then fess up next year and just pay what’s due, or will they start to hate me?

These are one off gains on which I accept tax will be due, rather than income. Obvs not seeking financial advice, just hive learnings

Ah the dreaded payment on account, my annual irritation.

If you are normally PAYE and won't have any income over and above your PAYE then you can tell HMRC that you want to reduce the PoA to £0 as you will have no abnormal income. This is all perfectly normal and above board.

If, however, you do have additional income above your PAYE next year then you may be met with penalties.

 

[Fromtherough]

Interest will always be applied. However, I think penalties are only applied if the reduction is fraudulent and/or negligent.

 

[GreiginFife]

Interest will always be applied. However, I think penalties are only applied if the reduction is fraudulent and/or negligent.

Depends on what is claimed. I had to ask for a reduction last year and had to give details on why my income would be lower. They certainly gave the impression that if
I declared something untrue that there would be penalty.

 

[Fromtherough]

Depends on what is claimed. I had to ask for a reduction last year and had to give details on why my income would be lower. They certainly gave the impression that if
I declared something untrue that there would be penalty.

Absolutely, has to be sound/reasonable request (and potentially evidenced). Not, for example, if someone just wants to avoid stumping up the POA by 31 January.

 

[GreiginFife]

Absolutely, has to be sound/reasonable request (and potentially evidenced). Not, for example, if someone just wants to avoid stumping up the POA by 31 January.

Yeah, think they’ve seen a spate of it followed by people asking for payment plans on unaffordable tax bills.

Mine is pretty much the same every year so my irritation is that the history of returns should be factored in to PoAs.

 

[Piece]

I've just paid my annual chunk. Always a pleasure

 

[Bunkermagnet]

I pay my 2 lumps as soon as the accountant has sorted it.
I normally get an interest repayment back for paying it early

 

[GreiginFife]

I've just paid my annual chunk. Always a pleasure

Giving that lot the fat end of £20k os so much pleasure it’s painful

 

[Canfordhacker]

Thanks for the input gents. I can prove I have had no taxable income this tax year, so have reduced the POA to zero. If I get a chargeable event before April 6th, so be it

 

[Mandofred]

I really don't get the way the self assessment process works.....so many wacky things happen.

As an American, I've only been doing the self assessments the last few years.....and on paper since I didn't have a Nat Ins number and the site stated I couldn't apply for one unless I was planning on working. Well, they've made the whole process so hard I really couldn't do anything without a NI number so I applied anyway and got it within 2-3 days. So NEXT year I'll do them online. Because my UK wife is getting a decent amount of US social security money, that has pushed her well over the limit and had to start doing the self assessment. So come summer she gets online and does it....the site states she owes £4000+ and will owe another £2K plus further into the year, I guess to pay "ahead" on next years fees??....I don't understand why, but that's what she had to do. But.....they send almost all of the £4000+ back to her and states she now will owe £4000 later in the year.....no explanation. She calls them.....they confuse her so she still doesn't know what is going on.

I get owing money at the end of the year if that's what you owe.....but why do they insist you pay more in the middle of the year? We are both going to owe less this next year since the interest rates have dropped a little and we have quite a bit less in savings since we bought a new house.....but they seem to insist that you only make more money every year.

People I golf with keep telling me that the online self assessment makes things so much easier......seems worse to me. Doing my taxes on paper seems to have been easier.

 

[Piece]

People I golf with keep telling me that the online self assessment makes things so much easier......seems worse to me. Doing my taxes on paper seems to have been easier.

I can do my SA online in about 30 mins. It's very easy. Its the amount at the end that's painful.

 

[GreiginFife]

I really don't get the way the self assessment process works.....so many wacky things happen.

As an American, I've only been doing the self assessments the last few years.....and on paper since I didn't have a Nat Ins number and the site stated I couldn't apply for one unless I was planning on working. Well, they've made the whole process so hard I really couldn't do anything without a NI number so I applied anyway and got it within 2-3 days. So NEXT year I'll do them online. Because my UK wife is getting a decent amount of US social security money, that has pushed her well over the limit and had to start doing the self assessment. So come summer she gets online and does it....the site states she owes £4000+ and will owe another £2K plus further into the year, I guess to pay "ahead" on next years fees??....I don't understand why, but that's what she had to do. But.....they send almost all of the £4000+ back to her and states she now will owe £4000 later in the year.....no explanation. She calls them.....they confuse her so she still doesn't know what is going on.

I get owing money at the end of the year if that's what you owe.....but why do they insist you pay more in the middle of the year? We are both going to owe less this next year since the interest rates have dropped a little and we have quite a bit less in savings since we bought a new house.....but they seem to insist that you only make more money every year.

People I golf with keep telling me that the online self assessment makes things so much easier......seems worse to me. Doing my taxes on paper seems to have been easier.

This is the Payment on Account that this thread was started because of.

If you have more than £1000 of tax liability on Self Assessment, HMRC want you to pay the same amount again on account. This was initially set up to counter increases in tax bills and reduce the risk that you can't/don't pay next year's bill to the same value.

The problem with it is that if you take/earn more money in any given year you need to increase your PoA, you then need to take more the following year to cover the on account payment and before you know it it spirals.

I have 12 years of returns for my Limited Co, each one is within £1k variance and I have not had any missed or late payments. This is my gripe with PoA that this history should be factored in but it isn't. If you have a one off increased tax bill that's completely anomalous then fair enough but for regular and consistent returns, it's a nonsense.