Payments on account - how are they offset?

ellectrastar

Hi all,

Last year I had a tax bill over £1,000 and therefore had to pay that amount plus the two payments on account in Jan and July.

This year my tax bill is also over £1,000. When I view my calculation it states that the amount will be added to my SA statement of account but that it doesn't include any payments on account. It says to "decide" how much to pay, check my SA account and use the calculation until it transfers over.

I am trying to ascertain whether, once I have submitted my return, the amount I owe will automatically be adjusted to deduct thepayments on account I made last year from this year's bill? I cannot see any section in the SA itself where it asks for details of payments made on account.

Also the POA amount to slightly more than what I owe for this year. Would the difference be refunded to me, or be deducted from the first POA I have to make at the end of January?


Many thanks in advance.

TheCyclingProgrammer

The payments on account do not factor into your self-assessment calculation. Your SA will simply calculate your tax liability for tax year (presumably the 2015/16 tax year).

Once your statement of account has updated, this amount will be added to it. It should already show your payments on account. The net result is your statement of account will either show a balancing payment due (if you've earned more than expected) or a refund (if you've overpaid). I cannot remember if any overpayment is refunded automatically or if it stays on your account however.

[Deleted User]

ellectrastar wrote: »

Hi all,

Last year I had a tax bill over £1,000 and therefore had to pay that amount plus the two payments on account in Jan and July.

This year my tax bill is also over £1,000. When I view my calculation it states that the amount will be added to my SA statement of account but that it doesn't include any payments on account. It says to "decide" how much to pay, check my SA account and use the calculation until it transfers over.

I am trying to ascertain whether, once I have submitted my return, the amount I owe will automatically be adjusted to deduct thepayments on account I made last year from this year's bill? I cannot see any section in the SA itself where it asks for details of payments made on account.

Also the POA amount to slightly more than what I owe for this year. Would the difference be refunded to me, or be deducted from the first POA I have to make at the end of January?


Many thanks in advance.

Try to think of your tax account like a credit card statement or bank account.

In January 2016 you made a payment on account followed by another one in July. These are credited to your account.

On 31 January 2017 you will have a debit equal to your total tax bill for 2015/16. You, from what you say, will still be in credit.

You will also have a debit for your POA for 2016/17 on the same day. So, in effect, the overpayment will be deducted. However, what is happening is that your 'tax account' balance self adjusts. If you paid the full POA for 2016/17 you would have a credit on your account carried forward.

In short, deduct your overpayment for 2015/16 from your first payment on account for 2016/17 and pay the difference - nothing more!

ellectrastar

Ok, I think I get it:

My account is currently in credit from payments on account made in the previous year.
The balancing payment will be deducted from that credit.
The outstanding amount is then deducted from the first payment on account for 2016/17.
I make the second payment on account in July and that, along with the POA made at the end of January, puts me in credit again ready for the next time I file my self assessment.

One last question - do these calculations happen automatically in my statement of account once the data has transferred over (i.e. it'll say no balancing payment due, first POA is x amount and second POA is x amount)? I'm guessing from what you've both said that they do...

[Deleted User]

The statement of account will show the POA's that you made in January and July.

It will then say something like 'adjustment from 2015/16 return' on each, reducing the balances to NIL. A credit for the difference will appear at the bottom. There will be a bit of interest added to each (you effectively paid early). It will then show a debit for the payment on account due next month.

ellectrastar

Thank you! Makes a bit more sense now. I will soon find out for myself once I file!

Dazed_and_confused

purdyoaten2

Op said bill last year and this year both over £1000 so won't the payments on account for 2015:16 be maintained rather than adjusted to nil?

Eg 14:15 bill say £1200 and 15:16 bill say £1400

31:01:2016 £1200 payable for 14:15 and £600 also payable for 15:16

31:07:2016 £600 payable (all 15:16)

31:01:2017 £200 payable for 15:16 PLUS £700 first payment on account for 16:17

[Deleted User]

Dazed_and_confused wrote: »

purdyoaten2

Op said bill last year and this year both over £1000 so won't the payments on account for 2015:16 be maintained rather than adjusted to nil?

Eg 14:15 bill say £1200 and 15:16 bill say £1400

31:01:2016 £1200 payable for 14:15 and £600 also payable for 15:16

31:07:2016 £600 payable (all 15:16)

31:01:2017 £200 payable for 15:16 PLUS £700 first payment on account for 16:17

I actually meant that the balance owing on the tax account statement would appear as NIL in January and July 2016 when they allocate the actual tax due from the 2015/16 return.

e.g. Payment on account 2015/16 - £600
less adjustment from 2015/16 return - £50
From Payment made 31 January 2016 - £550
Balance Payable - NIL

Of course the OP actually paid £600 and £50 would carry forward somewhere. The statements really do become indecipherable!

Also the op stated in the last paragraph:

Also the POA amount to slightly more than what I owe for this year. Would the difference be refunded to me, or be deducted from the first POA I have to make at the end of January?

I presumed, therefore, that the POA's in 2015/16 were more than the subsequent tax bill. i.e. the 2015/16 tax bill was lower than that for 2014/15.

I could be wrong though.