Netting a Tax Repayment

Lovingthisboard

Hi

I'm self-employed and earned slightly less in the 08/09 tax year than 07/08. As such I slightly overpaid on my first instalment in January for the 08/09 tax year (as it was estimated on the year before). I now have a small repayment sitting on my account plus I have to make my second instalment for 08/09 by the end of July.

Can i just pay less and the tax office will recognise I haven't reclaimed the repayment and 'net' it (or do I have to treat them separately i.e. reclaim just to pay it back again as part of a larger amount).

Thanks for your help.

suso

If you know your liabilty for 08/09 , you can ask them to reduce the payment on account.

So if for example your
POA 1 In January was £1000.00
POA 2 In July is due at £1000.00

And you know that your liability for 08/09 was £1750 then contact them to reduce your POA down to £875.00 each and all that you would need to pay would be £750.00 in July

If you haven't completed your return yet, don't reduce your POA too far, as if you reduce it too much they will start to charge interest on the outstanding amount.

If you want to, post the figures and someone will give you how much to reduce it down by.

All they would need is the liability for 08/09 and how much was the POA in January

When you know how much to reduce it down by, just call HMRC and they will do it over the phone in a couple of minutes.

Lovingthisboard

Hi

Thanks for replying.

I'll make up some dummy figures but they're of the same relative order.

My tax for 07/08 was 1200, say, and my tax for 08/09 was 1000 (return already submitted).

Just considering 08/09, I paid the first instalment of £600 in January (based on 1/2 x 07/08) and a while back, pre submission of my 08/09 return, I got a bill for the 2nd instalment of £600 for July. All fair enough.

Since submitting my tax return for 08/09, the tax people now know £500/£500 would have been the right repayments for 08/09.

Logging in and looking at my account I see I have a £100 repayment i.e. the overpayment on the first instalment which I'm invited to reclaim, and my 2nd instalment due for July has been reduced to £500.

I figured my 2nd instalment would be reduced to £400 (with no repayment due) i.e. they'd just net the 100 overpaid from Jan off the £500 owing.

But they seem to be laid out (very) separately. Maybe it's just the system (are repayment and collection 2 separate departments?).

I just figured when i logged in, it would say £400 due by 31/7 (rather than main section saying 'You have overpaid. £100 is due repayment' and click into accounts section which says £500 due by 31/7 ) It gives the appearance the 2 work completely separately. Do I really have to ask for my £100 back then pay £500 rather than just pay £400 (and they can keep the £100)?

suso

If the £100 has not been repaid then it will be allocated to any payments becoming due, (In this case the second POA due in July) so all you need to pay is the £400 difference.

If it has been repaid then you obviously need to pay the full POA of £500

I've never seen the system from the outside so I don't know what it actually shows, but any credits on the account not used for payments will automatically be allocated to any charges becoming due.

To be on the safe side before you make the payment in july check whether you have received a refund.

Lovingthisboard

Thanks for your helpful replies suso. Much appreciated :beer:

I think for peace of mind I'll just reclaim and then pay the larger amount back in July.

I have nightmares of not reclaiming, paying the lower 'net' and then getting a penalty for underpaying while I have a 'credit' sitting in another section. It probably wouldn't happen...

but I wish rather than there just being a 'request a repayment option', there was an explicit 'would you instead prefer this to be used as an offset to your next amount due' option and once you'd opted for that, a new recalculated amount for July appear. It would make it crystal clear (for me anyhow).