HMRC Self-Employment "GLITCH" that can bite you in the bum!

dj2k21

Hi All, new to the forum and wanted to share today's experience I've had with HMRC to see if anyone else had that the same issue and gather thoughts on the matter.

I run a small business (online based predominantly) and my previous years as self employed I hadn't made a profit as I was re-investing any money into better products and developing my current products. In the 19-20 financial year I made a small profit but with the corona situation I didn't get around to filing my tax return until xmas eve just gone.
I completed it online and it stated that I owed just over £1,100. At the time I didn't have the spare cash to pay this in full so I opted for the Direct Debit option which it set up there and then for me, deposit on the spot and subsequent payments of £100. Perfect I thought.

Fast forward to this morning and I received a letter saying I had missed my self assessment payment and I owed £800+ so immediately I checked my bank statement and sure enough the payment had come out as planned with no issues. After just over an hour, yes an hour on hold I finally got through to somebody who proceeded to explain that I should not have been able to  set up a direct debit online and that the direct debit I did set up was actually a savings account if you like to pre-empt the following years payment! Nowhere on the HMRC website did it state this at the time. The strange thing is though, they're coming after me for almost exactly what I owe  minus the 2 months and the initial deposit I've already paid? So how have they done that if supposedly the payments I have made were not for this debt?
The lady I spoke to has apparently made a note on my file to say I am paying monthly, however, I am now subject to a 2.60% interest charge on the debt, I have to create a personal tax account on the HMRC website and will be liable for whatever outstanding amount is come November this year when my Direct Debit ends. Now luckily for me it's only a small amount but for those making much more than me that have also gone the direct debit route it may cause absolute heartache! I wondered if anyone else had also suffered this issue at all? It's been a complete headache this morning resolving it and I just now have to hope it doesn't come and bite me in the bum. So lesson learned, from now on I will be completing my return by the end of April each year so I've got until 31st January the following year to pay and now get stung with a suprise that I have to pay in full instantly.

Thanks for reading.

Dazed_and_C0nfused

Not really sure what the issue is, anyone who pays their tax late will be charged interest by HMRC.
Even if the direct debit had worked in the way you expected you would still be paying interest on anything paid after the due date for payment.

Lomast

Its not a glitch you have just misunderstood, there is a hard deadline to pay the previous years tax by 31st of the following January.  The direct debit you set up was to pay next year's tax, you are quite lucky they have let you pay over time they are normally quite strict if payment is not received on time

Dazed_and_C0nfused

Don't forget you may also get a late payment penalty in due course.
https://www.which.co.uk/money/tax/income-tax/self-assessment-tax-return/late-tax-returns-and-penalties-for-mistakes-ad7n04l6qd9p

Marcon

dj2k21 said:

Hi All, new to the forum and wanted to share today's experience I've had with HMRC to see if anyone else had that the same issue and gather thoughts on the matter.

I run a small business (online based predominantly) and my previous years as self employed I hadn't made a profit as I was re-investing any money into better products and developing my current products. In the 19-20 financial year I made a small profit but with the corona situation I didn't get around to filing my tax return until xmas eve just gone.
I completed it online and it stated that I owed just over £1,100. At the time I didn't have the spare cash to pay this in full so I opted for the Direct Debit option which it set up there and then for me, deposit on the spot and subsequent payments of £100. Perfect I thought.

Fast forward to this morning and I received a letter saying I had missed my self assessment payment and I owed £800+ so immediately I checked my bank statement and sure enough the payment had come out as planned with no issues. After just over an hour, yes an hour on hold I finally got through to somebody who proceeded to explain that I should not have been able to  set up a direct debit online and that the direct debit I did set up was actually a savings account if you like to pre-empt the following years payment! Nowhere on the HMRC website did it state this at the time. The strange thing is though, they're coming after me for almost exactly what I owe  minus the 2 months and the initial deposit I've already paid? So how have they done that if supposedly the payments I have made were not for this debt?
The lady I spoke to has apparently made a note on my file to say I am paying monthly, however, I am now subject to a 2.60% interest charge on the debt, I have to create a personal tax account on the HMRC website and will be liable for whatever outstanding amount is come November this year when my Direct Debit ends. Now luckily for me it's only a small amount but for those making much more than me that have also gone the direct debit route it may cause absolute heartache! I wondered if anyone else had also suffered this issue at all? It's been a complete headache this morning resolving it and I just now have to hope it doesn't come and bite me in the bum. So lesson learned, from now on I will be completing my return by the end of April each year so I've got until 31st January the following year to pay and now get stung with a suprise that I have to pay in full instantly.

Thanks for reading.

That's not a glitch - it's a failure to understand how our gloriously simple (not!) tax system works. The HMRC website doesn't give you chapter and verse; it assumes that anyone trading on their own behalf has ensured they have the necessary knowledge to follow the story. Might be worth a look at this:https://www.gov.uk/topic/business-tax/self-employed