Self Assessment reducing payments on account

getthemax

I've just filled in my Self Assessment online and because I received a lot of untaxed interest in 2007-08 I have tax due on 31st January of £1,116.10 plus two payments on account of £558.10 due on 31st January and 31st July.

I estimate that my untaxed interest for this year will be a lot less, approximately £1,300 worst case, so tax due on that at 20% would be £260.

I have seen that you can apply to have your payments on account reduced, and if you get it wrong you may have to pay interest.

So once I submit the return, it seems that I can apply to have my payments on account reduced to say two payments of £150.

I think that would also reduce my total tax liability below the threshold where I could have the tax owed collected via PAYE. I'm not sure if that will automatically happen because I did choose that option online but based upon the calculations at the moment I've gone over the threshold.

Does anyone know if once I've got the payments on account reduced if I can ensure that the tax owed and on account is collected via PAYE?

Merlin_Accounts

Hi Getthemax

You can apply for a reduction in your payments on account by filling in form SA303 and submitting it to HMRC. If you are registered to file online with them I believe you can apply directly via their software.

Reducing the payments on account for 2008-09 will not allow you to elect for the tax due for 2007-08 to be collected via a coding adjustment (I'm assuming that the 2007-08 tax liability was above £2000). If your 2007-08 liability was below £2000 then you ought to have left box 2 of page 5 blank so that HMRC automatically code it for you (coded in 2009-10). If it was coded out you would not be required to make payments on account for 2008-09.

As you believe your 2008-09 liability is going to be so low you could actually try 'phoning HMRC to see if they will code it out for the remainder of this tax year (worth a try).

You did not indicate if your tax liability was less than 20% of your total tax for 2007-08 (ie you pay tax at source on employed or pension income). If it was less than 20% then you would not have to make payments on account anyway.

dori2o

Phone HMRC and ask if the 07/08 balancing payment can be coded via your 09/10 tax code. Assuming you have enough monthly income to cover the tax due this will be done as long as you have submitted your return before the due dates ( 31/10/08 for a paper return and 30/12/08 to have a balancing payment coded out if return submitted online).

Once this has been done the payments on account will automatically be removed from the statement.

If you do not want the balancing payment to be collected via your code, but do want to reduce your payments on account, either complete a SA303 or phone the tax office and they will reduce them for you over the phone.

moneypooh

"You can apply for a reduction in your payments on account by filling in form SA303 and submitting it to HMRC. If you are registered to file online with them I believe you can apply directly via their software".

you can do this as long as you are registered with them but not you can still have a paper submission, not just online.

getthemax

Thanks both - those are very useful replies. Since I file online and have only gone as far as the projected tax calculation, I guess I should submit the completed form and the pursue it further after submission.

There is an option to apply for a reduction of the payment on account online, so I think I should do that as soon as I've submitted my return and follow up your suggestions.

I thought I'd elected to have any tax owed coded in for 2009/2010, but can't check until tomorrow so perhaps I did it back-to-front.