Reduce Payments on Account

ollyissy

I need advice how to calculate to reduce payments on account, I have prepared this years accounts as a loss, so am hoping to reduce payments on account for 2010/11. Need further help [please.

Thanks

jennifernil

So you have calculated that you will in fact not be due to pay any tax in 2010/11?

If you are sure of your figures, you can request to reduce POAs on-line (if you file on-line), or phone or write to them.

If you will have some tax to pay, just work it out and request each POA to be half of the total.

The first POA for 2010/11 was due on 31/01/11.......have you already paid that?

If so, deduct it from the total due and request your second one be that amount.

If you reduce too much, you may get charged interest.

taxing

jennifernil wrote: »

So you have calculated that you will in fact not be due to pay any tax in 2010/11?

If you are sure of your figures, you can request to reduce POAs on-line (if you file on-line), or phone or write to them.

If you will have some tax to pay, just work it out and request each POA to be half of the total.

The first POA for 2010/11 was due on 31/01/11.......have you already paid that?

If so, deduct it from the total due and request your second one be that amount.

If you reduce too much, you may get charged interest.

When you make the request you are asked what you want to reduce each PoA to. That may be to £0.00 if you have ONLY this source of income which is producing a loss for the current tax year. Be very careful if you have other sources of income in addition to this as tax is due on income from ALL sources so the 10/11 PoAs are calculated based on the combined liability arsing from all sources in 2009/10.

The safest thing to do might be to rework 2009/10 without the 'profit' from the source which is loss making this tax year and see what the reduction is in tax terms: that will be the amount you can reduce the PoAs by.

There is another relief you can claim - once your accounts year end has passed (probably is 31 March - yes?) and only then - as you have to be able to accurately calculate the tax loss. When you know the tax adjusted loss for your year ended 31 March 2011, you can amend your 2010 Tax Return to include a claim for tax relief on those losses 'early' - so instead of waiting and setting the losses against your other income in 2010/11tax year (you might not have any other income anyway?) you work out how much your tax (and class 4 national insurance) would have reduced by if you claimed tax relief on the loss in 2009/10 tax year - that amount (combined reduction in income tax & class 4nics) is then allowed as a stand alone credit in you self assessment tax account - so, if your payments are up to date, you will get it refunded to you. This is claiming relief 'now' for losses in a later tax year. Remember you need to work out the TAX (& class 4 nic if liable before losses) you save (or would have saved) if the loss had been incurred in 2009/10 and you claim that TAX (not the loss) but the TAX back by amending the 2010 tax return. The boxes to claim in are within the losses bit of the self employment pages and also in the tax calculation (second page).

You can claim this 'early loss relief in addition to also reducing the 2010/11 payments on account - if you have made a loss your cash flow will be tight so getting tax back now will be a great benefit to you - yes?

Good luck.