'payment on account'

Buzzard1985

Can somebody explain what HMRC means by 'Payment on account'? Do you pay this as well as your liable Tax each year?

chrismac1

I think there should be a sticky on this. For your first year of SA, or if the total tax is under £1,000, there is just one payment - so in the case of 2010-11 this is due by 31 Jan 2012.

But if your bill for 2010-11 is over £1,000 it becomes more tricky. Let's say it's £2,000. The database will assume the bill for 2011-12 is also £2,000. It will ask for £1,000 of this on 31 Jan 2012 and £1,000 on 31 July 2012 unless you use the boxes on your return to put in different figures - because if you have a better estimate than £2,000 then you should use that.

Note that your final 2011-12 bill is not settled until you submit your 2011-12 return. Suppose you submit it in September 2012 and the final value is £2,200. You'll then get a statement showing the final £200 to be paid by 31 Jan 2013, along with the first £1,100 of 2012-13 unless you've entered a different figure for 2012-13.

Note all of these numbers exclude interest.

hogshead

I have been looking into some info regarding POA & also called HMRC.

If your POA is MORE than the final figure for the upcoming tax year I have been informed that you need to fill in the boxes to reduce your POA. Make a fair SE & pay just half of what you expect it to be along with your Jan bill & the remainder in July.

Will one then be penalised for not making the total which HMRC requested on the tax bill (as it will be less)?
Also once you adjust your POA & the bill falls below the £1000 your following tax year should revert to the normal one off payment.

Is this info correct?

Thanks

Mikeyorks

hogshead wrote: »

1. Will one then be penalised for not making the total which HMRC requested on the tax bill (as it will be less)?
2. Also once you adjust your POA & the bill falls below the £1000 your following tax year should revert to the normal one off payment.

Broadly correct - but the info on the HMRC website is fairly well explained as regards POAs?

1. No. Otherwise there'd be no point allowing you to reduce the POAs? But you need to ensure you reduce the POAs realistically - as you'll be charged interest right back to the original due dates if you get it wrong.

2. That's correct assuming you realise it's the tax due for the following year that has to be below £1k before POAs evaporate. So reducing the POAs has no influence on future POAs.

hogshead

Thanks for the reply.
Does one need to attach a letter with the SA303 form as to why the POA is reduced & that the full figure expected will not be received by HMRC or should one just pay what they believe it to be & await a reply from them?

Want this done & dusted by Wednesday.

Mikeyorks

No letter - just tick the appropriate box :

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

You just pay the balancing payment (if any) and the figure you estimate the 31/1 POA to be. You simply combine that figure and the SA system will allocate it to 1) Balancing payment and 2) residue to POA.

You're better doing the POA adjustment through SA online rather than posting a form.

PaulS43

After having amended the automatic assumption that my earnings for 2011/12 are going to be the same as 2010/2011 (they aren't), my tax account still shows nothing owing. I have already reckoned that my GROSS earnings for 11/12 will be about £12½K, the taxable (after allowances) part will be about £5K.... But This is GROSS before taking off gas, electric, phone, petrol, stationery, IT, etc, etc, etc, etc. Not allowing any of these costs (except my personal allowance). I did explain the situation in the any other information box on the tax form but they have not adjusted what the system said I should pay (which I can't because I haven't earnt that money this year - and to be frank, If I had what the system had auto-calculated, I'd have just paid it over because of the grief factor), what should I pay in advance? Half of a theroetical anticipated maximum of 20% (tax)+8%(NI) on this £5K, namely £700 (which I actually do have set aside to hand over) or all I have set aside (just shy of a grand) or something else? And when should I do this year's tax return? Before the July 2nd payment deadline - because by then I will know exactly what I will owe this time around?

Any advice

sousinho

POA caught me out too. I have the money for the tax but not quite enough for the rest of the money in advance. Which is about 2k. And quite frankly im unsure of my situation this year.

Looks like im going to have to pay as much as I can and take a penatly! :mad:

dampsquib

sousinho wrote: »

POA caught me out too. I have the money for the tax but not quite enough for the rest of the money in advance.

Sorry, this won't help you pay your bill, but .... nothing is actually being requested in "advance". The first POA due on 31/01/12 is in respect of income for the year ending 05/04/12, as the system allows the self-employed to earn for 10 months (Apr 2011 to Jan 2012) without any tax being paid. A further 6 months is then allowed before the second POA is due in July 2012. Then, if it turns out that even more tax is due (when the return has been submitted), the system allows a further 6 months before the Balancing Charge is due on 31/01/13. This is actually quite generous when compared to workers on PAYE who have their tax deducted each week/month - almost immediately after it has been earned.

wnoktnwbr

sousinho wrote: »

POA caught me out too. I have the money for the tax but not quite enough for the rest of the money in advance. Which is about 2k. And quite frankly im unsure of my situation this year.

Looks like im going to have to pay as much as I can and take a penatly! :mad:

you can request POA is reduced fyi.

hogshead

Form SA303 is the form you need to reduce POA. Possibly you can download it online?