Do I have to pay personal tax 'on account' for next year?

**ASB** · 2 October 2008, 11:04

Originally posted by MugsGame View Post

Hello (again)

Need a bit of advice. I've gotten my 2007/08 self assessment tax return calculations back from the accountant and have a big fat payment to make for my personal tax by 31 Jan 2009. Also, they have calculated the payments 'on account' for tax year 08/09. The first of these is also due by 31 Jan 2009, the second by 31 July 2009.

Now my cash flow hasn't been the best for the last half of this year, so I could do without these payments on account. I'd rather just pay the tax in one lump sum by 31 Jan 2010.

Do I have to pay these payments on account? Or can I ask HMRC nicely to let me pay annually, as I have been doing?

MTIA

You can appeal the payment to nil, the IR will happily accept your estimate of tax instalment payable.

If it turns out you are wrong they will charge you interest from the date was due.

This is the way the system works with tax not collected through PAYE.

**Xenophon** · 2 October 2008, 11:07

Welcome to HMRC's 'payments on account' system.

Terrific, isn't it?

**XLMonkey** · 2 October 2008, 11:08

I'm afraid that you do have to make payments on account.

The reason for this is that if you were being paid through a PAYE scheme or received your income through bank interest, then you would pay tax on your income as you received it (i.e. every month). If you are self assessing and have a large dividend income, then the payment on account is the equivalent (i.e. the government gets the money at roughly the same time as you earn it).

You can apply to HMRC to reduce/remove the payment on account, but only if you can prove that your income in this tax year is likely to be lower than your income in the previous tax year.

**moorfield** · 2 October 2008, 11:09

You can request a reduction, although I've tried that online recently but still not heard anything.

**Xenophon** · 2 October 2008, 11:15

http://www.hmrc.gov.uk/manuals/salfmanual/SALF303.htm

**Bumfluff** · 2 October 2008, 11:25

Originally posted by moorfield View Post

You can request a reduction, although I've tried that online recently but still not heard anything.

I do my SA online but I don't trust it enough to do reduce my on account payment. Last time I did it I just called the SA helpline and asked them to do it for me but it took a good few months to get a statement through showing it, but I rang prior to recieving the statement and the reduction had been processed and was all on the system.

**Moscow Mule** · 2 October 2008, 11:32

The online bit to reduce payments on account was Fubar'd about 6 months ago. My accountant got a confirmation, but it didn't get applied to the account, which was crap as I had to spend the morning on the phone trying to get through to HMRC.

I understand that it's working now...

**Alan @ BroomeAffinity** · 2 October 2008, 11:46

You should only apply for a reduction if you think that your next year's tax liability is going to be less. In practice, HMRC never ask for proof so generally you'd be OK. You'll get charged interest of you're wrong but at a lower rate than a bank would charge you if your tax takes you overdrawn.

**downsouth** · 2 October 2008, 12:06

I questioned this earlier this year with both HMRC and my accountant, both the responses were to pay what you owe, if it turns out that earnings are less than last year they 'overpayment' is repaid.

Repayment was really quick actually once the paperwork is submitted to HMRC.

I dont think its worth trying not to pay it, negotiate it down as if if actually higher then penalty payments come into play.

Just next year dont take as much cash out of the business as i've learnt this year

Do I have to pay personal tax 'on account' for next year?