Idiots guide to self assessment

laudan

Hi trying to get me head around self assessment payments. 

In 2018 started renting a property I inherited, April 2019 completed self assessment then paid then bill in full. 

I completed my second self assessment after April 2020 and it shows I owe tax of £1140.25 
Went on line to pay yesterday and it wants me to pay £1710.37 by 31.01.21
My account shows the following £2280.50 due for payment 
Tax year 21 first payment due be 31.01.21 £570.12 

Tax year 21 2nd payment due by 31.07 21 £570.13
Tax year 20 balancing payment due by 31.01.21 £1140.25 

So am I right in thinking the amount £2280.50 is the tax owed 19-20 and what they assume I will have to pay for 20-21.  They are assuming the income will be the same in 20-21 as it was 19-20 
Thanks for any advice all new to this 

Dazed_and_C0nfused

You have understood correctly.

The most important thing you need to remember now is that when you complete your 2020:21 Self Assessment return the £570 paid in January and July 2021 will NOT be taken into account.

Your return calculation shows the tax liability for that year and takes account of tax deducted at source such as under PAYE but not any payments YOU have made.

You need to file the return and then check your Self Assessment account a few days later to see the full impact. 

If your 2020:21 return calculation showed tax due of say £2000 then the statement of account would show the following (in relation to 2020:21).

31:01:2021 1st POA £570.12
31:07:2021 2nd POA £570.13
31:07:2022 Balancing Payment £859.75

laudan

Brilliant that now makes perfect sense.  Just seemed confusing as I wasn’t asked to pay anymore the first year for the next financial year. So I have more to pay in January than what I thought but at least understand why.  Thanks again 

Dazed_and_C0nfused

A refreshing change that you haven't referred to this as paying in advance 🙂.

Not posters questioning payments on account seem to overlook the fact that the first one is payable nearly 10 months after the tax year started and the second after the tax year ends when a lot of individuals in PAYE have paid down tax within a week of the tax year starting!

oldbikebloke

yes, payment on account (POA) means you pay something towards the current tax year based on the only info HMRC have, last year's tax return
on that basis the POA is 50% payable six months apart, and if the actual tax for that year is not exactly the same, a balancing payment is due when you then submit the tax return for that year (which is listed as the following January in recognition that is the final deadline for that year)
so for 20/21 liability,  you will pay some:
- in Jan 21 (ie. 9months after start of that tax year)
- in July 21 (ie 3 months after the end of 20/21)
what people often get confused over is you are not paying in advance. The most you pay is 50% and the first time you do that you have already "earned" 9/12ths of your income, so unlike a PAYE employee, you are paying your tax after you have earned the money 

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


oops , took too long to write (and edit) so already answered, but I'll leave it up for the sake of it 

oldbikebloke

laudan said:

Brilliant that now makes perfect sense.  Just seemed confusing as I wasn’t asked to pay anymore the first year for the next financial year. So I have more to pay in January than what I thought but at least understand why.  Thanks again 

when you sent in your first SA, the system is not set up to instantly "roll over" half of that for your second tax year, hence POA only kicks in during the second SA 

MikeBcn

its normal...

mpochwat

MikeBcn said:

its normal...

Is it really that normal?

Dazed_and_C0nfused

mpochwat said:

MikeBcn said:

its normal...

Is it really that normal?

Yes

oldbikebloke

mpochwat said:

MikeBcn said:

its normal...

Is it really that normal?

read the link already given, it explains the two precise circumstances where it is indeed normal