Tax 'payment on account' for OAPs.

loughlini

Should pensioners be liable for tax 'payment on account' ?

I am a retired OAP receiving the standard state pension plus a small corporate pension. It is small due to premature career termination through redundancy. I also receive a small French pension which I have to declare as overseas income. For this reason I am obliged to complete a self-assessment tax return. OK so far.

The problem is that my tax liability has nudged over £1000 for the first time. HMRC are now asking me to pay my tax for 2016/2017 plus 50% 'payment on account' for 2017/8 by January 2018.

How can I possibly pay tax before I have received my pension income. It is beyond absurd. I could perhaps understand it if I was operating a viable, profitable business but I'm not. I'm just a broke pensioner struggling to survive.
How can I avoid paying the payment on account?
Any help appreciated.

martinsurrey

loughlini wrote: »

Should pensioners be liable for tax 'payment on account' ?

I am a retired OAP receiving the standard state pension plus a small corporate pension. It is small due to premature career termination through redundancy. I also receive a small French pension which I have to declare as overseas income. For this reason I am obliged to complete a self-assessment tax return. OK so far.

The problem is that my tax liability has nudged over £1000 for the first time. HMRC are now asking me to pay my tax for 2016/2017 plus 50% 'payment on account' for 2017/8 by January 2018.

How can I possibly pay tax before I have received my pension income. It is beyond absurd. I could perhaps understand it if I was operating a viable, profitable business but I'm not. I'm just a broke pensioner struggling to survive.
How can I avoid paying the payment on account?
Any help appreciated.

payments on account for 17/18 covers April 17 to April 18.

We are 9 months through that period, so you should have 9/12 of your pension for the year, but are only being asked to pay 50% of the tax due...

doesn't seem too bad to me.

00ec25

as above, you have misunderstood the timelines.

- state pension: already received 9 months April 17 - Jan 18 without any tax deducted from it

- UK occupational pension: already received 9 months April 17 - Jan 18 probably / possibly with some tax deducted from it under PAYE depending on what tax code is being applied to it

- French pension: already received 9 months April 17 - Jan 18 without any tax deducted from it

- POA tax at Jan 18 is 9 months after start of 17/18 tax year

There is no dispensation for merely being a pensioner, the dispensation is for being "poor", ie having less than £1,000 of tax owing because it has not already been collected at source through PAYE each time you were paid.

You get most of your income outside of PAYE, and the total you get is sufficiently above the tax free personal allowance that you are left owing >£1k of tax anyway. Nothing to do with your age or your retirement, everything to do with how much you get and from where...

agrinnall

Perhaps you need to speak to HMRC about the tax code that applies to your company pension, because if the correct one is applied then all the tax that is due on it should be collected at source, which would only leave anything that needs to be paid from your French pension.

Dazed_and_confused

Op mentions small corporate pension so maybe the over-riding 50% limit applies and it s simply not possible for more to be deducted.

Irrespective of this however given the op's original query I'm not sure they will want to voluntarily pay more tax through PAYE as that would paying it in real time not 9 months into the year

loughlini

OK thanks for all the feedback. It looks like I didn't understand the timescales and income already received in 2017/18. On that basis it's not such a major problem. I'll put it down to Alzeimers....
Whilst we're on the subject - how much money has the Government recovered from the Cayman Islands? Just asking.

alewin

loughlini wrote: »

Whilst we're on the subject - how much money has the Government recovered from the Cayman Islands? Just asking.

What has that got to do with your tax situation and liabilities?
Have you got some money stashed there?

chrismac1

My standard wording to all clients (I'm an accountant) on this is:

Many aspects of the UK tax system are in my view bonkers, the most obvious one being the end date of 5 April. This is because of a decree made in 1582 by Pope Gregory 13, how daft is that? These stupid aspects which have not been changed are why it is the longest tax code in Europe. Self-assessment payments on account are another. They apply if the annual bill is above £1,000. On 31 January 2018 you will not only have to pay all of 2016-17 tax due, but 50% on account of 2017-18.

00ec25

chrismac1 wrote: »

Self-assessment payments on account are another. They apply if the annual bill is above £1,000. On 31 January 2018 you will not only have to pay all of 2016-17 tax due, but 50% on account of 2017-18.

in your opinion why should the self employed be given a 12 month tax free break compared to those paying on the nail via PAYE?

whilst I have great sympathy with your first point, your second seems driven by your usual bias

martinsurrey

chrismac1 wrote: »

My standard wording to all clients (I'm an accountant) on this is:

Many aspects of the UK tax system are in my view bonkers, the most obvious one being the end date of 5 April. This is because of a decree made in 1582 by Pope Gregory 13, how daft is that? These stupid aspects which have not been changed are why it is the longest tax code in Europe. Self-assessment payments on account are another. They apply if the annual bill is above £1,000. On 31 January 2018 you will not only have to pay all of 2016-17 tax due, but 50% on account of 2017-18.

00ec25 wrote: »

in your opinion why should the self employed be given a 12 month tax free break compared to those paying on the nail via PAYE?

whilst I have great sympathy with your first point, your second just shows you up for being disconnected

Exactly,

Your staff earn money in May 2017 and pay PAYE in May 17, self employed people earn money in May 17 and don't pay the tax until Jan 18 at the earliest, and maybe Jan 19!

The part of the tax code that is archaic is the lack of real time reporting and paying by the self employed/other income.

Pennywise

martinsurrey wrote: »

The part of the tax code that is archaic is the lack of real time reporting and paying by the self employed/other income.

At least an employee receives their wage in the month in which they pay the tax. That's the difference.

A s/e person may have to wait several months before they sell stock they've bought in a month, or to invoice for long term contract work in progress done in a month, or to receive payment from credit customers for stuff sold in a month. On the other side, would HMRC really like to have to repay tax to a business that's just invested a huge sum of money in a new piece of equipment?

The idea of paying tax in the month it's earned is fine for the simplest of small businesses who basically run "cash" businesses, but for the majority, it would cripple them.

It's why HMRC's "making tax digital" initiative has stalled. HMRC made the same simplistic assumptions and completely ignored the reality of business cash flows. The fluctuations in "profit" and tax payable/repayable from one month to another would be a massive problem for the Treasury trying to fund the country. Having to prepare monthly accounts and submit monthly tax returns would be an enormous burden for business.

Bigger businesses already have to make quarterly corporation tax payments, and rightly so. They have the resources to do it. But I don't think that crippling huge numbers of small businesses would really do the country much good!