Tax return completed and asked for 'payment on account'?

ET1976

This isn't a 'cutting' tax question but couldn't see another tax board to post on.

I have just done my tax return for 08/09 and I owe £1200 tax for income from property rental. At the end of the calculation it says that in addition to this I have to pay £600 'on account' for 09/10 by 31 Jan 10, and another £600 (i.e. all the tax they expect me to owe in the coming tax year) by 31 July 10.

This is only my 3rd tax return, but I have never seen this before.

I phoned the revenue to ask, and the woman just repeated back to me what was on screen, i.e. 'it's your payment on account for next year'. When I persisted with my actual question (what does payment on account mean and why am I being asked to pay it this year?), I was put on hold for a while and she came back and said it was because I owed over £1000 tax for 08/09. My previous dealings with people on the helpline have not inspired confidence, so just wanted to check a couple of things.

1) Is this correct - I have to pay all my tax for 09/10 by 31 July 10 rather than 31 Jan 11 because in the previous tax year I owed more than £1000?

2) What if the tax I owe for 09/10 is less than £1200? This will definitely be the case because I had a very good year in 08/09, and owing to a combination of large maintenance bills and having to reduce the rent, my property income will have decreased by about 25% in 09/10. Do I still have to cough up, and then wait ages for them to refund me?

Thanks for any advice.

BoGoF

Before tax year 2008-09 you did not have to make POA's for the following year if the tax due was under £500. This 'threshold' has now increased to £1000 from 2008-09. So I am assuming in previous years you owed less than £500 ?

It is correct that you will now have to make POA's towards your 2009-10 tax bill. If you think your actual tax owing for 09-10 will be less than the POA's then you can asked for the POA's to be reduced. Si if you think you will owe £600 then ask for them to be reduced to £300 each. Assuming your 09-10 liability does not exceed £1000 you will not have to make POA's for 10-11 in January/July 2011.

Be careful if you do ask for the POA's to be reduced as you will be charged interest on the difference if you go too low.

My advice would be is to get your 09-10 return submitted asap after 5/4/10 so the actual liability can be calcultated

ET1976

Last year I owed £890 tax, so more than £500, but was not asked for payment on account. I don't remember the year before. But anyway, that's water under the bridge.

How do I go about asking for it to be reduced? Do I literally just ask, or do I have to provide paperwork? I know pretty much exactly what I will owe for 09/10 already, as I have recieved a fixed rent in advance to cover the months up to the end of the tax year, and if any unforseen maintenance occurs that will only reduce the tax I owe.

Thanks for your help.

BoGoF

Did you do it online ? If so, I think you may able to reduce them online.

Failing that you may be able to do it over the phone, or alternatively complete the attached form and send it off

http://www.hmrc.gov.uk/sa/forms/sa303.pdf

Tarasam

ET1976 wrote: »

Last year I owed £890 tax, so more than £500, but was not asked for payment on account. I don't remember the year before. But anyway, that's water under the bridge.

How do I go about asking for it to be reduced? Do I literally just ask, or do I have to provide paperwork? I know pretty much exactly what I will owe for 09/10 already, as I have recieved a fixed rent in advance to cover the months up to the end of the tax year, and if any unforseen maintenance occurs that will only reduce the tax I owe.

Thanks for your help.

Just ring the helpline and they'll do it for you.

If you owed £890 last year then you most definitely should have had POA's so this is curious, the SA system would automatically allocate them unlesson your tax return you'd requested them to be NIL. But as you say, its by the by.

I do hope that the helpline regains your faith at some point, we do try our best, the amount of info we have to know is astounding and obviously we have new trainees some of the time, I would imagine if the woman put you on hold for a POA qu then she was a trainee, its a basic qu so she should have known the answer.

ET1976

I did it online. I'll try what's been suggested, many thanks.

Mikeyorks

ET1976 wrote: »

Last year I owed £890 tax, so more than £500, but was not asked for payment on account.

There are several criteria leading to POAs being required. The first and most obvious is that the tax due exceeds £1k. The 2nd, which may impact, is that you're not required to make POAs if deductions at source (normally PAYE) exceed 80% of the years liability.

swanny65

I also fell foul of POA for 2008/09. i am PAYE and Self Employed. I had a good 2008/09 and owed over £2000.00 to HMRC and have to make a POA. Usually pay the tax owed through my PAYE so a treble wammy this month. (LOL)

Agree with the earlier poster only reduce your POA if you know it is wrong otherwise you will be charged interest. Get your 2009/10 return in before the end of July 2010 in order that any adjustment can be made to POA before the 2nd payment is due.

I will be paying up asap and at least i then have no debt owing to HMRC......