Reduce Payments on Account

MoneyTreeMe

Hi,

I have calculated that my profit for 19-20 tax year is higher than my 20-21 tax year due to covid.
My turnover for 19-20 tax year was £130k, giving profit of £105k.  £35k tax is due on this, as well as two payments on account of £17.5k

For 20-21 tax year, my turnover will be £120k, giving profit of around £90-95k... 

So around 10-15% lower.

Should I, therefore, reduce my payments on account on my self assessment tax form by 10%?  
Can someone please explain how this works and I have never done this before.

Thank you.

[Deleted User]

At the very end of the online submission form, in the tax calculation section, you are asked ‘Do you wish to reduce your payments on account for 2020/21?’

sheramber

You can elect to reduce the payments on account to whatever figure you decide.
When your return is processed the correct amount for these payments will be calculated.
If you have reduced the payments too much then you will be charged interest on the amount you should have paid but didn't.
e'.g  you are asked for payments of £500 each
you reduce payment to £300 each
when processed your payments on account are calculated as £400 each.
You will be charged interest on the   £100 from 31 January until the date of payment.
if you submit your return asap after 6 April then your correct payments will be calculated before the July payment on account is due. So you will have the exact amounts payable.

MoneyTreeMe

sheramber said:

You can elect to reduce the payments on account to whatever figure you decide.
When your return is processed the correct amount for these payments will be calculated.
If you have reduced the payments too much then you will be charged interest on the amount you should have paid but didn't.
e'.g  you are asked for payments of £500 each
you reduce payment to £300 each
when processed your payments on account are calculated as £400 each.
You will be charged interest on the   £100 from 31 January until the date of payment.
if you submit your return asap after 6 April then your correct payments will be calculated before the July payment on account is due. So you will have the exact amounts payable.

Thanks... If I reduced my 19-20 payments on account but my actual tax is still lower than those reduced payments on account, would the net difference between reduced payments on account and actual tax owed for 20-21 be carried over to the 21-22 tax year, or would they be refunded to me when I submit my 20-21 return in July?   i.e.  if my next tax bill is still lower than those reduced payments on account?

[Deleted User]

You have an account with HMRC. No matter what your payments on account are you have to settle your liability on 31st January 2022 which will be the total liability for 2020/21 less any payments on account made. Your first payment on account for 2021/22 will be added to your account and the amount payable will obviously be reduced by any overpayment in existence at that time.