Payment on account, will changes flag me for attention?

[nervousnewbie2018]

I have just completed my 2016-2017 SA, I owe approx £8k, which means I have POA of £4k now and £4k in July, however I have recently got married and made my wife a 50/50 partner so the amount of dividends I take this year will drop quite dramatically, and with it my SA liability from April 2018 to about £2.5K assuming all other variables stay the same.

I know if I over pay the POA I will earn 0.5% of any over payment so I have two options.

1) Do nothing, if I complete my SA in April 2018 it will show that I have over paid, would the second POA due July 2018 then be negated and I would then have over payed approx £1500. Would this be refunded or held over as the next POA due?

2) Drop my POA from £8k, to £2.5k and add a note explaining why I have done so on this years SA, this should square me for 2017-2018, however I would than have to pay a similar amount as POA for Jan 2019 and July 2019?

If I am right in my assumption that in 1) the second POA will be nullified once I complete my next SA I guess I would be in pretty much the same situation either way, but without the risk of getting on HMRC's radar if I change the POA.

Has anyone changed the POA they were due to make, what reason did you give, and did it flag your for HMRC's attention going forward?

Thanks in advance

(PS asked my accountant and waiting for their reply, for some reason they are very busy this time of year!)

[radish2008]

I have just completed my 2016-2017 SA, I owe approx £8k, which means I have POA of £4k now and £4k in July, however I have recently got married and made my wife a 50/50 partner so the amount of dividends I take this year will drop quite dramatically, and with it my SA liability from April 2018 to about £2.5K assuming all other variables stay the same.

I know if I over pay the POA I will earn 0.5% of any over payment so I have two options.

1) Do nothing, if I complete my SA in April 2018 it will show that I have over paid, would the second POA due July 2018 then be negated and I would then have over payed approx £1500. Would this be refunded or held over as the next POA due?

2) Drop my POA from £8k, to £2.5k and add a note explaining why I have done so on this years SA, this should square me for 2017-2018, however I would than have to pay a similar amount as POA for Jan 2019 and July 2019?

If I am right in my assumption that in 1) the second POA will be nullified once I complete my next SA I guess I would be in pretty much the same situation either way, but without the risk of getting on HMRC's radar if I change the POA.

Has anyone changed the POA they were due to make, what reason did you give, and did it flag your for HMRC's attention going forward?

Thanks in advance

(PS asked my accountant and waiting for their reply, for some reason they are very busy this time of year!)

Your SA covers your earnings up to April 2017 though right ? I'd do nothing - let them reimburse you if needed. My accountant said this is a flagger and they are not happy if you pay less and then are proven wrong. I'm still not clear on why you think making changes now is going to affect your 2016/2017 tax position.

[Lance]

Has anyone changed the POA they were due to make, what reason did you give, and did it flag your for HMRC's attention going forward?

Yes. I did it last year. Accountant put 'other income has changed' in the explanation box.
It'll only be an issue if you reduce the POA and then pay more. At this time of year you should have a good idea what you'll be paying next January so pretty safe IMO.

[TheFaQQer]

Has anyone changed the POA they were due to make, what reason did you give, and did it flag your for HMRC's attention going forward?

Due to a miscalculation by my accountant one year, I had a tax bill to pay and then had a POA demand.

Since I knew I wasn't going to hit the same level the following year by any means, I reduced to from the thousands they wanted down to £100 (two payments of £50) just in case I had a small bill to pay the following year.

Nothing that I'm aware of flagged so far

[nervousnewbie2018]

Your SA covers your earnings up to April 2017 though right ? I'd do nothing - let them reimburse you if needed. My accountant said this is a flagger and they are not happy if you pay less and then are proven wrong. I'm still not clear on why you think making changes now is going to affect your 2016/2017 tax position.

I am not trying to change the 2016/17 position, I am hoping to change the POA that is due as part of 2016/16 to cover 2017/18 as I know my liability will be lower this tax year than last tax year (I hope that makes sense)

[nervousnewbie2018]

Yes. I did it last year. Accountant put 'other income has changed' in the explanation box.
It'll only be an issue if you reduce the POA and then pay more. At this time of year you should have a good idea what you'll be paying next January so pretty safe IMO.

I am pretty sure I know what I will pay for the current tax year and it will be considerably less than I pay for 2016/17 which is why I want to reduce the POA now

[nervousnewbie2018]

Due to a miscalculation by my accountant one year, I had a tax bill to pay and then had a POA demand.

Since I knew I wasn't going to hit the same level the following year by any means, I reduced to from the thousands they wanted down to £100 (two payments of £50) just in case I had a small bill to pay the following year.

Nothing that I'm aware of flagged so far

So it's best to over estimate still by a a few hundred to cover any unkowns? As it stands my POA is £8k and if things stay as I plan them to (Feb/Mar wage and the planned dividend) that will drop down to £2.5k.

Two questions then, on the SA did you drop down the POA to £50 or £100 (ie do you have to set the full POA at the time on the SA or do you set it as half of what you want it to be which is then repeated in July?

[Michael at BI Accountancy]

Has anyone changed the POA they were due to make, what reason did you give, and did it flag your for HMRC's attention going forward?

In my opinion this does not raise any flags or further attention from HMRC. Reductions to POA are fine so long as you have a reason, normally due to lower profits or income etc.

As TheFaQQer notes, should you reduce the POA to a level which does not cover the personal tax liability then you would be charged interest on late payment. Therefore definitely best to over budget on that front.

[TheFaQQer]

So it's best to over estimate still by a a few hundred to cover any unkowns? As it stands my POA is £8k and if things stay as I plan them to (Feb/Mar wage and the planned dividend) that will drop down to £2.5k.

Two questions then, on the SA did you drop down the POA to £50 or £100 (ie do you have to set the full POA at the time on the SA or do you set it as half of what you want it to be which is then repeated in July?

I dropped it to £100 and paid two lots of £50.

If you reduce it too far and then have to pay it, then you get hit with an interest charge. If you overpay, then HMRC will pay you interest. Needless to say, these two rates are not the same.

I could have reduced it to nothing, but the advice was to pad it a little bit just in case there was a small charge to pay.

[nervousnewbie2018]

I dropped it to £100 and paid two lots of £50.

If you reduce it too far and then have to pay it, then you get hit with an interest charge. If you overpay, then HMRC will pay you interest. Needless to say, these two rates are not the same.

I could have reduced it to nothing, but the advice was to pad it a little bit just in case there was a small charge to pay.

Thanks to all those who have answered, one final question (more a statement of understanding) on the SA when there is the option to change the POA this is the value for the whole year, but half of which is payable with the previous years liability on the 31st January, with the rest in July?