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08-09 tax return asking for money for 09-10 as well! whats happening? Please help!
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waxtadpole
Posts: 2 Newbie
in Cutting tax
I am filling out my tax return for the year 08-09. I input all of my data and got my subtotal. However, it seems to have added a cost for the year 09-10, which it says is due by 31st January too.... I have no idea what this is for, and why it's due now and not in a years time! can anyone enlighten me?
Here's what it says. Im concerned with everything that follows 'plus...' :
This section provides you with the result of your calculation.
Total tax, Class 4 NIC and Student loan due for 2008-09 : £2,429.68
Plus First payment on account for 2009-10 : £1,214.00
Payment due by 31 January 2010 : £3,643.68
This amount does not take into account any 2008-09 payments on account you may have already made.
Second payment on account for 2009-10 will be due by 31 July 2010 : £1,214.00
Here's what it says. Im concerned with everything that follows 'plus...' :
This section provides you with the result of your calculation.
Total tax, Class 4 NIC and Student loan due for 2008-09 : £2,429.68
Plus First payment on account for 2009-10 : £1,214.00
Payment due by 31 January 2010 : £3,643.68
This amount does not take into account any 2008-09 payments on account you may have already made.
Second payment on account for 2009-10 will be due by 31 July 2010 : £1,214.00
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Comments
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Because your 08/09 liability is more than £500 HMRC assume that your 09/10 liability will be similar and ask you to make 2 payments on account (POA) for the 09/10 tax year.
One is due 31/01/10 and the second is due 31/07/10 and each payment is half of the total 08/09 liability. If you think your liability will be less in 09/10 than in 08/09 you can ask for your POA to be reduced by completing - http://www.hmrc.gov.uk/forms/r40.pdf or reducing the POA online.This is a system account and does not represent a real person. To contact the Forum Team email forumteam@moneysavingexpert.com0 -
It's a toughie if you're doing/seeing it for the first time and weren't expecting it, but that's the way it works unfortunately. In addition to the amount due for 2008/09, you pay an estimated amount for the 2009/10 tax year based on the return you're completing now for 2008/09; and as Pam says you pay half of that in January (now) and the rest in July. It must be estimated as HMRC don't yet know what your liability will be for this current 2009/10 tax year.
Come next January (2011) when you fill in your return for 2009/10, there will be an adjustment if the estimated POAs you make this year mean you've overpaid or underpaid; and you will also pay the first instalment (half) of the estimated POA amount for 2010/11, with the second half payable in July 2011.
See http://www.hmrc.gov.uk/sa/understand-statement.htm~cottager0 -
Dont they ask you how much you wish to pay in advance of next year? We always put 0!0
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thanks for your help guys. Yes, sadly this is the first time I have experienced this. Came as quite a shock.
I called them up this morning, paid my 08-09 tax bill, and managed to get the first of the two 09-10 payments delayed by a couple of weeks, which hopefully means I'll be able to sort it out and on track.
Mudd14 : I always put zero at any given opportunity0 -
Yes. Like all government agencies it is always helpful to talk to them. I will almost certainly keep an eye out for this when I fill out my frst self assesment at the end of this year.[strike]-£20,000[/strike] 0!0
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Mudd 14 - I seriously hope your comment was in jest. You will be charged interest if any tax subsequently becomes due at the end of the year!0
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Dont they ask you how much you wish to pay in advance of next year?
No. If your liability for this year exceeds £1000 (it's just been raised from £500) - or you are part PAYE and less than 80% of your tax is due that way ...... then payments on account (POA) are mandatory.
If you choose to reduce them because you maintain your profit / earnings will be less the following year then - as previous post - you will be charged interest all the way back to the original POA due date if it subsequently materialises they were owing at that time.If you want to test the depth of the water .........don't use both feet !0 -
It is a shock when it happens.... they changed it a number of years ago, but if you're new to doing a tax return and you're doing it yourself for quite straight forward income, it can be a bit of a panic moment.
I like to pay as much as possible up front, it's paid then and if circumstances change then I'll get a rebate rather than finding I've already spent the tax money!
Realistically, what's happening at the bank account level is:
April 2008 to April 2009: You earnt money, got it, tax money's sat in your bank account since then.
April 2009 to now: You earnt money, get it, the tax money you will have to pay out of that is already theoretically sitting in your bank account waiting to be paid.... now, if you've already spent it then that's a different ball game... so paying on account is a good idea for people who would have been tempted.0 -
The little grey cells aren't what they were (!), but if memory serves the system was changed some years ago to align what we pay nearer to the tax year the payments refer to. So we pay towards our 2009/10 assessment in the year (January) and a little beyond it (July), instead of retrospectively... but this means estimating the amount, because the real figures won't be in till later.
The only way to really set the estimate is to base it on the previous tax year's figures; though as Pam said earlier, you can claim to reduce the estimate if you believe your liability for the current year will be lower than the estimate suggests.
Once you're "in the cycle" it evens itself out more, because in each year you're only paying instalments for one tax year, plus/minus (in January) the adjustment for estimated payments made the year before.
But the first time's a bit of a killer, because you're joining the cycle from a standing start. Almost everyone else is already running round the track (the payment cycle), but you need to catch up with them by effectively paying 2 years' tax in 6 months: half is real (2008/09 for you) and the other half is estimated (for 2009/10). In the following and each subsequent year the January adjustment is 'real', based on actual figures, and all the rest is estimated; but by then you're running round the track with the main pack, and only paying one year at a time.
[Hope this is explained correctly... if not someone shout and I'll edit/withdraw it!]~cottager0 -
Payments on account were introduced when SA replaced Schedule 'D'.
That was in 1996/7 .......... how time flies!If you want to test the depth of the water .........don't use both feet !0
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