Self Assesment - Payment on accounts

Wobhai

Hey everyone,

I've looked over the other POA threads here and none quite answer the question I'm left with so I'm hoping you can help again.

So this is the first year trading I've passed the £1000 criteria and after submitting all parts of my self-assessment I am presented with the following:

Total amount due for 2017-18 £5000
Plus
First payment on account for 2018-19 £2000
Total to be added to Self Assessment account due by 31 January 2019 £7000
Second payment on account for 2018-19 will be due by 31 July 2019 £2000

So I'm uncertain how the "First payment on account for 2018-19 £2000" works exactly. Elsewhere in the page, it states "HM Revenue and Customs will add this amount to your Self Assessment statement of account.". But it isn't actually directly referencing or even near the mention of the First Payment for 2018-19.

Does this mean that the First payment for next year will automatically be accounted for in the 2018-19 self-assessment? Or do I need to keep note of this somewhere and note it in the next self-assessment I fill?

Besides the obvious of paying them tax twice, which I'm sure they'd be happy to take, I'm trying to be pretty meticulous with my records to keep things simple going forward. However, I'm new to this and not sure with figures like this one, which are important to track and which are automatically accounted for etc.

Thanks again.

00ec25

you have failed to understand that the tax return does not take account of what you have paid. It is simply a calculation of what is due for the year in question in isolation.

it is your (online) tax statement of account which shows the balance that you have with HMRC, and this obviously will include any POA

when you therefore pay the tax bill, it is up to you to deduct any POA which relate to the bill due for the year in question. There will then be a delay of typically a few days between you submitting a tax return and your account balance reflecting the fact you have paid that tax return assessment net of any brought forward POA you deducted from your physical payment

how to check your balance is explained here:
https://www.gov.uk/understand-self-assessment-bill/payments-on-account

Wobhai

00ec25 wrote: »

you have failed to understand that the tax return does not take account of what you have paid. It is simply a calculation of what is due for the year in question in isolation.

it is your (online) tax statement of account which shows the balance that you have with HMRC, and this obviously will include any POA

when you therefore pay the tax bill, it is up to you to deduct any POA which relate to the bill due for the year in question. There will then be a delay of typically a few days between you submitting a tax return and your account balance reflecting the fact you have paid that tax return assessment net of any brought forward POA you deducted from your physical payment

how to check your balance is explained here:

Thanks for the quick reply.
I still don't really understand the process and I had already found that link you shared and that confused the situation even more.
It shows an example of payments which haven't even been fully paid. They owe £3000 so make to paymets of £900... That's not even an option I'm provided.

I'm not sure if I fully understood your reply, but from what I did get, I will need to track these figures and deduct them from future payments on my account?

Nearlyold

As yet you haven't made any payments on account - so the full amount of tax for 2017-18 is due by 31/01/19 plus your first payment on account for the 2018-19 tax year (this is usually 50% of the amount of tax due for the preceding tax year)

This is the example in the link in italics - perhaps you could explain which is the part you dont understand as it seems very clear.

Your bill for the 2016 to 2017 tax year is £3,000. You made 2 payments on account last year of £900 each (£1,800 in total).
The total tax to pay by midnight on 31 January 2018 is £2,700. This includes:
your ‘balancing payment’ of £1,200 for the 2016 to 2017 tax year (£3,000 minus £1,800)
the first payment on account of £1,500 (half your 2016 to 2017 tax bill) towards your 2017 to 2018 tax bill
You have to pay your second payment on account of £1,500 by midnight on 31 July 2018.
If your tax bill for the 2017 to 2018 tax year is more than £3,000 (the total of your 2 payments on account), you’ll need to make a ‘balancing payment’ by 31 January 2019.

Wobhai

Cool. Thank you for your help guys. Much appreciated.

polymaff

Wobhai wrote: »

Cool. Thank you for your help guys. Much appreciated.

If your business works out, you'll be in the PoA regime for some time, so it is important to emphasise that you pay what HMRC tell you to pay, when they tell you to pay it. That's all laid out in your Self Assessment Statement - also known as an SA300. The nearest thing to your idea of "deduct" is that you may always ask HMRC to reduce a forthcoming PoA. Just don't be a wise guy and be tempted to reduce it below what would eventually be due.

Wobhai

polymaff wrote: »

If your business works out, you'll be in the PoA regime for some time, so it is important to emphasise that you pay what HMRC tell you to pay, when they tell you to pay it. That's all laid out in your Self Assessment Statement - also known as an SA300. The nearest thing to your idea of "deduct" is that you may always ask HMRC to reduce a forthcoming PoA. Just don't be a wise guy and be tempted to reduce it below what would eventually be due.

Thanks, I'll look into the SA300 form to see if that sheds any light on the situation. I haven't seen that form in my searches before, thank you for that.

I'm not trying to avoid paying anything and I have enough to pay it all in one go so that's not an issue and I don't need to reduce anything.

Unfortunately, I'm not a tax accountant or working for the UK government so the concept of paying for half a year ahead based on the earnings of the previous year without any figures to go off is absolutely mind-boggling logic to me.

The part that is unclear to me is how this is all accounted for in the future as I'm already well aware they're more than happy to apply penalties and interest on incorrect values and this guesswork approach at pre-emptive tax seems like it's asking to be incorrect at some point.

EDIT: just looked at the SA300 statement and I think that kinda clears it up for me.

"If you made payments on account last year You’ll need to deduct any payments on account you made last year towards this year’s bill to work out what you owe.
Log in to your account and click ‘View statements’ to check the payments on account you made last year."

I don't remember seeing that noted anywhere else and seems to indicate that I will need to keep track of the value and deduct it in my 2018-19 payment.

Thank you.

polymaff

Wobhai wrote: »

... Besides the obvious of paying them tax twice, which I'm sure they'd be happy to take

Don't joke about it. I've seen them try this one on... :T

polymaff

Wobhai wrote: »

Unfortunately, I'm not a tax accountant or working for the UK government so the concept of paying for half a year ahead based on the earnings of the previous year without any figures to go off is absolutely mind-boggling logic to me.

The part that is unclear to me is how this is all accounted for in the future as I'm already well aware they're more than happy to apply penalties and interest on incorrect values and this guesswork approach at pre-emptive tax seems like it's asking to be incorrect at some point..

Well, HMRC have been criticised, as the previous regime was far more generous. Their two rebuttals are:

1. You guys have had it too easy compared to those guys on PAYE, and,

2. You're never asked to pay tax on income you haven't yet received - i.e. your first PoA on 2018-19, due 31st January 2019 should be more than covered by business income up to that date - whatever your accounting period.

It is, as you suggest, though, a bit of a shake-up in your first year of PoA - as it is to a lot of other tax-payers, folk with savings interest, who all thought "great - interest paid gross from now on" but then found themselves clobbered by PoA.

00ec25

Wobhai wrote: »

I don't remember seeing that noted anywhere else and seems to indicate that I will need to keep track of the value and deduct it in my 2018-19 payment.

Thank you.

which is what I told you.
perhaps you ought to get someone to check over your tax return as you are struggling so much with the explanations