Rules for payments on account

jennifernil

My husband has now totally stopped working so will have less income this tax year than last year. He noted this on his 2009/10 return as his additional income was from abroad and therefore paid gross. He had made POAs totalling £3700 in 09/10, which more than covered his additional liability here.

Despite giving details of expected untaxed income for 10/11, he has still been asked to make POAs totalling £3500, so he needs to ask to reduce these. He still has untaxed income from abroad in the form of a pension, so there will be extra tax due here.

After adding up everything and deducting what he is paying in PAYE on his UK pensions, I have calculated that he will be due to pay about £975 in additional tax for 2010/11. It is difficult to be precise as his foreign pension varies every month with the exchange rate.

Is there a figure below which he is not required to make POAs ? Or will he be due to pay say £488 in January 2011 and in July 2011?

morgani

as his taxable income was above the threshold last year he is required to make Payments On Account.

He can however fill out for SA303 (http://www.hmrc.gov.uk/sa/forms/sa303.pdf) a claim to reduce payments on account. You should make sure the payments on account cover the amount of tax that is due as interest will be charged if too little tax is paid.

Mikeyorks

jennifernil wrote: »

Is there a figure below which he is not required to make POAs ?

Raised from £500 to £1000 - a couple of years ago. If he files online - should be able to Login and reduce the POAs to £zero that way?

BoGoF

The payments are account are based on the 09/10 liability not what you expect the 10/11 liability to be. If you reckon £975 will be due for 10/11 you should make a claim to reduce the POA's to half of this each.

If your calculations are correct and the actual 10/11 liability is under £1000 then no POA's will be due for 11/12

Mikeyorks

A further opt out from POAs, which might apply ............ is that no POAs are due where more than 80% of the tax due in a year is collected via PAYE

robram2

I have a different scenario, and would like clarification if anyone can help here.

Basically, I was both employed and self employed last year (tax year ending april 2011). I had a pretty good amount of self employed income (£21000 profit) and in my employment earned £33000 PAYE where tax was taken off (£5300).

I have done my online self assesment and it calculates that I owe £7600 for this year, and £3,800 on account (x2)

NOW, in this tax year, I have changed situation. I now run one limited company, pay myself the minimum £589/month and just take share dividends from the company.

My self employment has only earned about £1500 simply from interest on payments i'm still waiting for.

So, my self employment earnings are only £1500, so theoretically I would argue on an SA303 to reduce my payments on account to £300 or so.

BUT, my question is do I need to estimate what my income from the dividends will be by April 2012? as HMRC claim that interest will be payable if the tax calculated is more than my estimate.

OR, do dividends not come into this tax calculation?

If anyone can help, i'd appreciate it greatly.

BoGoF

You will need to factor all potential sources of income when calcualting any reduction in your POA's. So in your case you will need to estimate any dividend income.

robram2

BoGoF wrote: »

You will need to factor all potential sources of income when calcualting any reduction in your POA's. So in your case you will need to estimate any dividend income.

Ok, but if my dividend income falls below the £35000 threshold there will be no tax to pay on the dividends is that right? or is it 10% of the dividends that I need to estimate?

Cheers for your advice.

BoGoF

You need to look at your total income, if you have no higher rate liability on your dividends then there will be no extra tax to pay in respect of the dividends.

jennifernil

Mikeyorks wrote: »

A further opt out from POAs, which might apply ............ is that no POAs are due where more than 80% of the tax due in a year is collected via PAYE

Since this old thread is here again, I have a question regarding what Mike said.

Due to the GBP dropping in value against the NOK, the pension income for 10/11 rose enough to push the POAs to £1010.

So, if the POAs are over £1000, but over 80% of the total tax for the year was collected via PAYE, does the above still apply? Or do you have to satisfy both conditions?

suso

jennifernil wrote: »

Since this old thread is here again, I have a question regarding what Mike said.

Due to the GBP dropping in value against the NOK, the pension income for 10/11 rose enough to push the POAs to £1010.

So, if the POAs are over £1000, but over 80% of the total tax for the year was collected via PAYE, does the above still apply? Or do you have to satisfy both conditions?

either, if just one of the criteria is satisfied then poa's shouldn't be set up.