Paying on account

Thecrazy1

Help needed!

I fill in an SA and every year I pay an amount towards the next tax year. I pay this in January and again in July. I assume this means that I will have paid the next year in full. So what I don't understand is that come the following January I am asked for the full tax amount plus and extra payment on account for the following tax year. Am I paying twice. I am so confussed.
Thanks

[Deleted User]

You are confused.

Your payments on account are not for the following year but the current year - the deadline for filing is in the next year.

For example:

2017-18 first payment on account due 1st January 2018
2017-18 Second Payment on account due 1st July 2018.

Return must be filed by 31st January 2019.

If you think about it you are making the second payment on account of 2017/18 tax year almost four months after the end of that tax year!!!

Thecrazy1

Thank you. So if my tax bill was say £1600 but the amount I have to pay on Jan 31st 2018 is actually £2400 , which is £800 on account and the in July I have to pay another £800.
Is this correct?

TheCyclingProgrammer

The reason you’re being asked to make a balancing payment for the previous tax year is because your payments in account are only an estimate based on your previous earnings.

If you earn more you’ll owe more. If you earn less you’ll be due a rebate.

TheCyclingProgrammer

Thecrazy1 wrote: »

Thank you. So if my tax bill was say £1600 but the amount I have to pay on Jan 31st 2018 is actually £2400 , which is £800 on account and the in July I have to pay another £800.
Is this correct?

If it’s your first time making payments on account yes.

If you’ve already made payments on account the previous year these will be subtracted from your tax liability. You will only have to pay any additional amounts (the balancing payment) plus your first payment on account for this year.

Thecrazy1

This is not the first year I have been paying his way for a couple of years but the amouth is pretty much the same every year.

[Deleted User]

Thecrazy1 wrote: »

This is not the first year I have been paying his way for a couple of years but the amouth is pretty much the same every year.

So your tax bill for 2016/17 is £1600 based on your return.
You take off what you paid in January 2017 and July 2017 by way of payments on account. Let's say both were £800. You now owe nothing for 2016/17 - it is settled.

You now must make payments on account for 2017/18 (because we do not know what your income will be - the tax year has not yet ended). These will be based on 2016/17 so they are £800 each.

And repeat.

Thecrazy1

Thank you all for your quick relies and help. It makes sense now. I will have a look back a statement just to double check

TheCyclingProgrammer

Just to give you another example, let’s say you earned £1600 in 15/16 so last year you paid payments on account of £800 in Jan and July.

In 16/17 you earned £1800. You’ve already paid £1600 on account so you now have a balancing payment of £200. Your payments on account for this year will be £900 each.

You will be due to pay £1100 in January and £900 in July.

chrismac1

Just to be clear:

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.

[Deleted User]

chrismac1 wrote: »

Just to be clear:

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.

No - he won't because the op has been making payments 'this way for a couple of years' and he/she will not have to pay 'all of 2016/17 tax due' on 31st January.

Hopefully you have not confused him or her