balancing payment - self assessment

MoneyTreeMe

Hi.
If I pay 45k tax on earnings for 19-20 tax year, will I also need to pay half of 45k (assuming no balancing payment for 18-19 tax year carried forward) to go towards 20-21 tax bill - so I will end up paying around 67k in tax by July 2021?  Please can you confirm this.  Thanks.

Dazed_and_C0nfused

No.

You will need to pay £67.5k by 31 January 2021 and an additional £22.5k by 31 July 2021.

If your "tax" figure is actually your Self Assessment liability then some elements may not be included in the POA figures i.e. Class 2 NIC and Capital Gains Tax.

If you feel the POA are excessive compared to what you will owe for 2020:21 you can make a claim to reduce the POA.  But if you get it wrong you will be charged interest on late payment when the POA are reinstated (in full or part) after your 2020:21 return is filed.

MoneyTreeMe

Dazed_and_C0nfused said:

No.

You will need to pay £67.5k by 31 January 2021 and an additional £22.5k by 31 July 2021.

If your "tax" figure is actually your Self Assessment liability then some elements may not be included in the POA figures i.e. Class 2 NIC and Capital Gains Tax.

If you feel the POA are excessive compared to what you will owe for 2020:21 you can make a claim to reduce the POA.  But if you get it wrong you will be charged interest on late payment when the POA are reinstated (in full or part) after your 2020:21 return is filed.

Ok, if I pay those 2 payments on account by July 2021 and my 2020-2021 tax bill turns out much lower, will HMRC refund those 2 payments on account when I submit my 2020-2021 tax return, or if for some reason I stopped earning?  Thanks.

Dazed_and_C0nfused

Yes, providing you claim a refund on your return.

Whether you have stopped earning isn't relevant though, it is the figures on your return that matter.

If you don't file the 2020:21 return until this time next year they will usually retain sufficient money to pay anything due on 31 January 2022 (2020:21 Balancing Payment or 2021:22 first POA).

MoneyTreeMe

Dazed_and_C0nfused said:

Yes, providing you claim a refund on your return.

Whether you have stopped earning isn't relevant though, it is the figures on your return that matter.

If you don't file the 2020:21 return until this time next year they will usually retain sufficient money to pay anything due on 31 January 2022 (2020:21 Balancing Payment or 2021:22 first POA).

Just so I understand this, if I decide to pay those 2 balancing payments together with my main tax bill, so around £90k in total by Jan 2021, and I submit my 20-21 tax bill in July and it turns out I owe around 30k in tax, I assume HMRC will use the surplus £10k towards my 2021-22 tax bill - or would I have the option of a refund if I submitted early in July?  Thanks.

Dazed_and_C0nfused

They are POA (for 2020:21), the £45k is the Balancing Payment (for 2019:20).

Not sure where you get £10k from?

If you did pay £90k in January (why??) and then filed your 2020:21 return in July showing £30k due for 2020:21 then HMRC would reduce each POA from £22.5k down to £15k and you would be refunded £15k.

You would get a small amount of interest (0.5%/year?) for the £7.5k overpaid from January 2021.

MoneyTreeMe

Dazed_and_C0nfused said:

They are POA (for 2020:21), the £45k is the Balancing Payment (for 2019:20).

Not sure where you get £10k from?

If you did pay £90k in January (why??) and then filed your 2020:21 return in July showing £30k due for 2020:21 then HMRC would reduce each POA from £22.5k down to £15k and you would be refunded £15k.

You would get a small amount of interest (0.5%/year?) for the £7.5k overpaid from January 2021.

Would rather pay tax up front and get it out the way so I know how much cash I really have... as opposed to delaying the inevitable. Will have to pay it someday or be fined / go to prison, might as well do it now and get it over with!!  

Can you defer the July 2021 balancing payment to Jan 2022 - has the government confirmed this yet?? Although again, what is the point in delaying if I have the funds to pay now...!!!  

I expect HMRC will come down heavy after the pandemic and really vet accounts to try and claw back underpaid tax during the pandemic... I don't want to be one of those people!!

Dazed_and_C0nfused

I don't remember reading anything to suggest July 2021 payments can be deferred.