Self Assessment

talexuser

Just filled in my self assessment for 20/21, and wonder of wonders, the tax owed agrees with my spreadsheet. However since this is the first time I've done SA, I did not realise they added on another 50% on account for this 21/22 tax year to be paid by the 31 Jan 22, and then they want the other extra 50% on account to be paid by the 31 Jul 22. Is this the usual system, you pay the previous years tax by the next years July? Is that an incentive to calculate the 21/22 tax before July 2022 so the final payment is correct, or should you wait till Jan 31 2023?

How easy is it to change the second account figure, and will they accept  a change within reason?

MX5huggy

Yes 50% on account in Jan and July is normal. The figures work out if you’ve under or over paid, it’s corrected when you submit your next SA. 

I do mine in Jan so I’ve paid a 50% guess in July then have the actual figure for the last tax year which balances up and I have to pay that and 50% on account (in effect the whole tax bill) and I know what I have to pay in July on account again. If you are on PAYE from a job you can file early and have the tax collected from your pay.

pramsay13

Yes it's correct but you will already have the income that the tax relates to by that point. 

EthicsGradient

talexuser said:

How easy is it to change the second account figure, and will they accept  a change within reason?

It's easy; see "Reduce your payments on account" here: https://www.gov.uk/understand-self-assessment-bill/payments-on-account . Before the January 2021 payment, I knew my income from self-employment would be a few thousand less in 2020-21 than 2019-20, so I just gave them a revised estimate (putting it at the upper end of what I expected, so I wasn't reducing it below what it was likely to be by April), and that reduced the amount I had to pay then - they accepted it without question (I imagine a lot of people are in the same Covid-related boat).
If I can finish the 2020-21 return before July, I'll be able to reduce that too.

polymaff

talexuser said:   ... will they accept  a change within reason?

EthicsGradient said: ...  they accepted it without question

You ask - they'll agree. Afterall, if you are wrong they'll charge you interest at 2.6%.

https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates.

And settling a debt with HMRC that increases day by day is not that simple. ...

talexuser

Thanks, I assume you get charged interest only if you are late with a payment? If you make a change to the July payment, and it turns out you have underpaid compared to the whole year, do they charge interest if you pay the correct amount in full the next January?

Is there any point in submitting now or e.g. next December if you intend to pay in full in January anyway?

polymaff

I'm not sure of the current situation.  I was "punished" via backdating to the first PoA - but HM Treasury has recently instructed HMRC to have a strictly financial relationship with its "customers" rather than punishing them.

Yeah - right. ...

Well, I wait, as that leaves me the opportunity to plug in data from MSE and other postings just to see what HMRC would do to it in the latest financial year.  Waiting also avoids the shambles of a couple of years ago when, you may remember, HMRC only had a reasonably debugged SA software package in place by the October following the end of relevant FY.

Love to know the story behind that. ...

Dazed_and_C0nfused

talexuser said:

Thanks, I assume you get charged interest only if you are late with a payment? If you make a change to the July payment, and it turns out you have underpaid compared to the whole year, do they charge interest if you pay the correct amount in full the next January?

Is there any point in submitting now or e.g. next December if you intend to pay in full in January anyway?

You will be charged interest on any late payment, paying by the following January wouldn't avoid interest.

For example,

2021:22 POA due 31:01:2022 = £1,500
2021:22 POA due 31:07:2022 = £1,500.

You reduce each POA to £400 because you think your 2021:22 liability will only be £800.

You pay each £400 POA on time.

You file your 2021:22 return in October 2022 and it transpires your actual liability for 2021:22 is £1,200.

Each POA would be increased from £400 to £600 and you would be charged interest on,
£200 from 1 February 2022 till it was paid 
£200 from 1 August 2022 till it was paid

talexuser

Wow, thanks, so zero incentive to under estimate.

polymaff

talexuser said:

Wow, thanks, so zero incentive to under estimate.

I wrote about this about 5 years ago, viz the silent extension of PoA from a relatively few to significantly more.  Just like higher rates !

There was a time when you could reduce to zero and get away with it.  That was then, though.

That said, many could reduce - falling savings interest rates will surely affect not just my future  SAs. ... .