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

[ratewhore]

I think so. Though the words are confusing.

OK. I take that back. Mind you, they are still tossers for giving me a K code multiple times...

Tossers!!!

[ASB]

Are my dates out?

I think so. Though the words are confusing.

http://www.hmrc.gov.uk/sa/dead-pen.htm#3

[ratewhore]

If you have earned it (and most will have) then it's not unreasonable to ask you to pay tax on half the year 9 month through the year.

Are my dates out?

[ASB]

It was all fine but the only thing that annoyed me was getting the red letter from HMRC the week after I paid saying if I didn't pay within x days they would take me to court to pay tax on money I hadn't even earned yet.

For the current year the 1st payment on account is 31/1/09. If you have genuinely not earned it (e.g. one big divi at the end of the tax year) then you have a legitimate ground to appeal the payment on account.

If you have earned it (and most will have) then it's not unreasonable to ask you to pay tax on half the year 9 month through the year.

[ratewhore]

And another thing, they'll probably give you a K tax code which means you lose your tax free allowance and pay tax on a higher salary you didn't actually take. They've done that to me twice and I had to get it changed back both times...

Tossers!!

[ratewhore]

I got my payment on account reduced. You also don't have to pay it on the due date but interest will apply. I ended up paying both my January and July instalments last month with around 100 sheets of interest.

It was all fine but the only thing that annoyed me was getting the red letter from HMRC the week after I paid saying if I didn't pay within x days they would take me to court to pay tax on money I hadn't even earned yet.

Tossers!!!

[MugsGame]

Hmm, yes I'll ask the accountant about negotiating it down as I know I've earned less this year.

Thanks all!

[downsouth]

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

[Alan @ BroomeAffinity]

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.

[Moscow Mule]

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...

[Bumfluff]

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.

[Xenophon]

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

[moorfield]

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

[XLMonkey]

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.

[Xenophon]

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

Terrific, isn't it?