PAYE Reference Question

[rich2k]

If you have completed a self assessment tax return you may be liable to make payments on account for the following tax year.
You will have to make payments on account if the tax due for the year was over £1,000, the only exception to this is where more than 80 per cent of the year's liability was covered by tax deducted at source.

If you do have to make payments on account they will be held by HMRC and offset against any liability that may arise in the next tax year. The payments on account to be made are calculated as 50% of the previous year’s liability, the first being due on 31st January following the tax year, the second by the following 31st July.

To illustrate this with an example

When completing the 2010/11 tax return Mr Bloggs’ total tax due was £6,000 and this was due for payment by 31st January 2012.

As the total tax was more than £1,000 Mr Bloggs also had to make payments on account towards his 2011/12 liability. These will equate to £3,000 each (50% of £6,000) and are due for payment to HMRC on 31st January 2012 and 31st July 2012.

When completing the 2011/12 tax return Mr Bloggs’ total tax due was £10,000 and this was due for payment by 31st January 2013, however, he had already made payments on account of £6,000 towards this so he only had to make a balancing payment of £4,000 by 31st January 2013.

Again, as the total tax due exceeded £1,000 payments on account will be due.

These will each total £5,000 and be due for payment by 31st January 2013 and 31st July 2013.

Reduction of Payments on Account

You can claim to have Payments on Account reduced or even cancelled, maybe due to a reduction in your income or a change to how you receive your income.

This can be done as part of the tax return submission itself or you can complete an SA303 form and send this to your tax office.

Please note that if you make a claim to reduce your Payments on Account and it then turns out that you should have made the original payments (i.e. the balancing payment due when completing your tax return), you will be charged interest from the date the payment should have been made.

Only reduce your payments on account if you know that your income for the current year will be lower than last year's or else you will be liable to interest charges or penalties (if the reduction was made without taking proper care).

Alan

Thanks so much for your response Alan,

Im still quite confused though, i havent filled out a self assessment for this year?

From January to July i was using an umbrella so i believe this tax would be what you meant by taken at source? I then created a limited company in July and started using this from August until now. Would i still need to do a self assessment for the end of this month?


Im really thinking about moving accountants because if this was the case and i havent been informed i wont be happy

Thank you again

[Nixon Williams]

The balancing payment on the 31st of January? what does this mean? I worked under an umbrella company for the first 6 months of the year so would this be a payment of my loan contributions through that?

Thanks again, apologies for my clueness-ness

Rich

If you have completed a self assessment tax return you may be liable to make payments on account for the following tax year.
You will have to make payments on account if the tax due for the year was over £1,000, the only exception to this is where more than 80 per cent of the year's liability was covered by tax deducted at source.

If you do have to make payments on account they will be held by HMRC and offset against any liability that may arise in the next tax year. The payments on account to be made are calculated as 50% of the previous year’s liability, the first being due on 31st January following the tax year, the second by the following 31st July.

To illustrate this with an example

When completing the 2010/11 tax return Mr Bloggs’ total tax due was £6,000 and this was due for payment by 31st January 2012.

As the total tax was more than £1,000 Mr Bloggs also had to make payments on account towards his 2011/12 liability. These will equate to £3,000 each (50% of £6,000) and are due for payment to HMRC on 31st January 2012 and 31st July 2012.

When completing the 2011/12 tax return Mr Bloggs’ total tax due was £10,000 and this was due for payment by 31st January 2013, however, he had already made payments on account of £6,000 towards this so he only had to make a balancing payment of £4,000 by 31st January 2013.

Again, as the total tax due exceeded £1,000 payments on account will be due.

These will each total £5,000 and be due for payment by 31st January 2013 and 31st July 2013.

Reduction of Payments on Account

You can claim to have Payments on Account reduced or even cancelled, maybe due to a reduction in your income or a change to how you receive your income.

This can be done as part of the tax return submission itself or you can complete an SA303 form and send this to your tax office.

Please note that if you make a claim to reduce your Payments on Account and it then turns out that you should have made the original payments (i.e. the balancing payment due when completing your tax return), you will be charged interest from the date the payment should have been made.

Only reduce your payments on account if you know that your income for the current year will be lower than last year's or else you will be liable to interest charges or penalties (if the reduction was made without taking proper care).

Alan

[rich2k]

Chase your accountant, the references should have come through by now. It's not unheard of for HMRC to not register a scheme even when requested if they think the first pay date will be too far in the future - if you apply for PAYE and tell them the first wages will be paid in three months time they'll email back and effectively tell you to go away and come back closer to the time. Your accountant would have got an application reference when they applied, so they can use that to follow up on the application. You can of course call HMRC yourself if you prefer, just call the Employers Helpline HMRC Contact us


If you have a student loan then it will be taken into account on your tax return too, so they'll get their money one way or the other, either through your tax code or as a balancing payment on 31st Jan.

Thanks for your response Clare,

The balancing payment on the 31st of January? what does this mean? I worked under an umbrella company for the first 6 months of the year so would this be a payment of my loan contributions through that?

Thanks again, apologies for my clueness-ness

Rich

[Clare@InTouch]

This still hasnt arrived? Would it be best for me to call hmrc instead of relying on my accountant?
Ive had another letter off the stdent loans company so this is really starting to play on my mind

Chase your accountant, the references should have come through by now. It's not unheard of for HMRC to not register a scheme even when requested if they think the first pay date will be too far in the future - if you apply for PAYE and tell them the first wages will be paid in three months time they'll email back and effectively tell you to go away and come back closer to the time. Your accountant would have got an application reference when they applied, so they can use that to follow up on the application. You can of course call HMRC yourself if you prefer, just call the Employers Helpline HMRC Contact us

If you have a student loan then it will be taken into account on your tax return too, so they'll get their money one way or the other, either through your tax code or as a balancing payment on 31st Jan.

[Old Greg]

What does your accountant say?

This is the sort of thing that you are paying them for (at least, it should be unless they are incompetent or you have opted for a cheapskate service).

He says it's Christmas morning and you're to go back to bed or there will be no presents.

[Gonzo]

This still hasnt arrived? Would it be best for me to call hmrc instead of relying on my accountant?
Ive had another letter off the stdent loans company so this is really starting to play on my mind

What does your accountant say?

This is the sort of thing that you are paying them for (at least, it should be unless they are incompetent or you have opted for a cheapskate service).

[rich2k]

This still hasnt arrived? Would it be best for me to call hmrc instead of relying on my accountant?
Ive had another letter off the stdent loans company so this is really starting to play on my mind

[Danielsjdaccountancy]

Hi All,

I set up a limited company around august time, i have now recieved a letter from student loans asking for PAYE reference etc.

My accountant says that the reference still hasnt arrived, is this normal?
Does it usually take this long?

Any help is much appreciated

Unfortunately different tax offices operate at different speeds. We've found some references taking up to 6 weeks to come through.
When we've challenged HMRC on this they just say they are being processed.

Always worth chasing for an explanation as this can give them a boot up the backside. Your accountant should be able to do this on your behalf.

[rich2k]

You can apply for PAYE online and it usually takes around 2 weeks. It's worth giving HMRC a call to chase if you've not had anything back yet. If your accountant told them that you weren't paying wages in the next few months then HMRC may have the scheme on hold until closer to the payment time (no idea why they do that, but they do!)

Thanks for your quick response, Clare

Much appreciated.

I usually like to be in control and handing over the reigns to an accountant is making me panic lol

Thanks again

[Clare@InTouch]

You can apply for PAYE online and it usually takes around 2 weeks. It's worth giving HMRC a call to chase if you've not had anything back yet. If your accountant told them that you weren't paying wages in the next few months then HMRC may have the scheme on hold until closer to the payment time (no idea why they do that, but they do!)

[rich2k]

Hi All,

I set up a limited company around august time, i have now recieved a letter from student loans asking for PAYE reference etc.

My accountant says that the reference still hasnt arrived, is this normal?
Does it usually take this long?

Any help is much appreciated