Self Assessment Underpaid Tax

ardvark2019

Looking for some help and advice please
I changed employer in May 2019 and as a result I have underpaid tax in the 2019/20 tax year due to an incorrect tax code being used. A correct tax code for 2020/21 is being used now by my employer to take into account unpaid tax on savings  interest.
When I go to pay my unpaid tax in my self assessment account along with the amount due for 2019/20 being paid by 31/1/21 I am also being asked to pay half this amount by 31/1/21 and the other half by 31/7/21 based on the assumption that I will owe the same amount in the 2020/21 tax year. But hopefully this won't be the case as my new tax code should be taking care of this. Any advice on what I should do ?

Dazed_and_C0nfused

If you are confident that you will owe no tax in 2020:21 then you can make a claim to reduce the payments on account for 2020:21.

But as they are initially determined by the tax owed for 2019:20 you need to be aware that if you get this wrong and you do owe some tax for 2020:21 (for any reason whatsoever) then the payments on account would be payable on those dates and you would be charged interest for paying late.

For example if the POA are say £1,500 each time and you reduce them to nil but your 2020:21 Self Assessment return shows you owe say £200 then each POA for 2020:21 will be reinstated for £100 each time and you would be charged interest on anything you pay after 31 Jan 2021/31 July 2021.

Remember your tax code is only ever provisional and cannot always deduct the correct amount of tax so err on the cautious side when it comes to reducing payments on account.  If you pay too much and your 2020:21 return shows less is due then any tax overpaid would be refunded to you.