Payment On Account

JoeWebber

When filing my 2014-15 return I was asked to pay a sum on account; I assumed this applied to self-employed only (I have just pension and savings/investment interest) and declined.
I now realise that this was because my outstanding tax was more than £1000 for the first time (although I have still not seen this stated anywhere).
The same occurred when filing my 2015-16 return.
When I got my 2015-16 SA statement it included accruing late payment interest of £40 for payments on account due in January and July 2016.
My questions are as follows:
1 Where is there comprehensive information on payment on account? I can’t find it anywhere on the HMRC site.
2 What is the rate of interest applied in the event of nonpayment?
3 It seems to me that it is a better deal to pay the small amount of interest each year and invest the two large sums that I therefore do not pay early. Is this reasonable or am I missing something?

Dazed_and_confused

Try
https://www.gov.uk/understand-self-assessment-bill/payments-on-account

And
https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates

What would you be paying "early". The first payment on account for 2016:17 is due at the end of January 2017, three quarters of the way through the tax year.
Penalties can be charged for certain incorrect claims to reduce payments on account
https://www.gov.uk/hmrc-internal-manuals/self-assessment-manual/sam1040

EdSwippet

Dazed_and_confused wrote: »

What would you be paying "early".

Well, from the first document you linked: "‘Payments on account’ are advance payments towards your tax bill..." :-) Without them, any final tax balancing payment wouldn't become due until the Jan 31 following the end of the tax year. So early, then, relative to the situation where payments on account aren't required because you duck under its trigger limits.

JoeWebber wrote:

It seems to me that it is a better deal to pay the small amount of interest each year and invest the two large sums that I therefore do not pay early. Is this reasonable or am I missing something?

HMRC's apparently currently charges 2.75% on late payments. If you can beat that after tax -- so more than 3.43% for basic rate and more than 4.58% for higher rate tax -- on a fixed six-month or year term with 100% safety then you come out ahead of HMRC. I don't think you will find an account that pays this.

JoeWebber

Many thanks for the helpful replies.