Tax return way higher than expected! 13 October at 4:04PM in Cutting Tax 7 replies 300 views

jmb1

Looking for some advice. I'm a sole trader and I've just filed my tax return via my accountant. They have provided my return submission and amounts which states I owe 15k tax in total as expected (NI, income tax, less payments on account, first jan 22 payment and second july 22 payment).

I've logged onto hmrc and it states i owe £32k. This for some reason seems to include a totalling of year to end april 21 AND year to end apr 22 tax amounts. I dont recall seeing this before. I was up to date at end of last tax year so cant be a case of unpaid tax balance.

I've asked the question to them but unfortunately my accountant is now on holiday for 5 days so just wondering if anyone can put my mind at rest in meantime really. Im praying i do indeed only owe the amounts my accountant says i do i.e £15k, and the extra 17k is next years balancing payment etc and will be reduced and/ or due next years tax bill. What worries me is that it includes the whole extra 17k in the total £32 amount, listed along with the two jan & jul bills, as a "balancing payment" also due in Jan 2022.

I know its probably difficult without looking at the exact figures and statements but just wondered if anyone could clarify from this scant info why possibly hmrc are stating I owe so much more over what my accountant has stated i need to pay in january/july 22? I'm sure in previous years paying these two bills cleared everything.

Do I not worry, just pay what is owed according to my accountant and when i file my next tax return in april 22 I should see the correct amount? However that still doesnt account for why they say the total 32k is due in jan 2022. Utterly confused.

TadleyBaggie

I assume they are wanting "money on account" for the current tax year based on last years accounts. That's pretty much standard practice.

It happened to me once due to a large US stock options sale, HMRC wanted money for the following year too which was never going to happen as the stock sale was a one off. I contacted HMRC and they cancelled the request for money on account.

jmb1

TadleyBaggie said:

I assume they are wanting "money on account" for the current tax year based on last years accounts. That's pretty much standard practice.

It happened to me once due to a large US stock options sale, HMRC wanted money for the following year too which was never going to happen as the stock sale was a one off. I contacted HMRC and they cancelled the request for money on account.

That sounds to me like they reduced payments on account, as they predicted your following year's accounts would be as good as last but in your case it was a one-off.

The only thing that then makes me wonder, is that I received the first three SEISS grants this tax year (£21,750) and perhaps they are inflating next years' predicted profit based on that. That's as far as I can think the only main difference that has occurred. Could be it?

Dazed_and_C0nfused

It's not inflated, it's based on the facts i.e. your Self Assessment liability for 2020:21 is what establishes any POA due for 2021:22.

You are quite entitled to ask for the 2021:22 POA to be reduced if you believe your liability for 2021:22 will be less than the POA.

If you reduce the POA by too much then when your 2021:22 return is filed then you would be charged interest on anything paid late i.e. if you reduce them to £2000 and the 2021:22 return shows they should have been £3,000 then you be charged interest on the £1,000 that you will be paying late.

purdyoaten2

 The total tax due for 2020/21 is £34000. Presumably £9500 was paid by way of payments on account both in January and July 2021. (If not can you clarify what was paid?) This leaves £15000 as a balancing  payment due on 31Jan 2022.

A payment on account for 2021/22 is also due on 31 Jan 2022 - £17000 (half of £34000). A further identical payment is due in July 2022. If you believe that £34000 is excessive you can reduce them bearing in mind what Dazed has said above.

Does this makes sense?

Jeremy535897

I suspect we will see a lot of unexpected (by taxpayers) increases in payments on account due to SEISS, particularly for those whose income is normally within the CIS and therefore subject to a 20% deduction at source, unlike SEISS. It is easy to reduce payments on account online, although as has been pointed out earlier, interest will arise if the payments on account are reduced by too much (perhaps by forgetting SEISS 4 and 5).

purdyoaten2

Jeremy535897 said:

I suspect we will see a lot of unexpected (by taxpayers) increases in payments on account due to SEISS, particularly for those whose income is normally within the CIS and therefore subject to a 20% deduction at source, unlike SEISS. It is easy to reduce payments on account online, although as has been pointed out earlier, interest will arise if the payments on account are reduced by too much (perhaps by forgetting SEISS 4 and 5).

Yes - I raised that issue about six months ago (when the 20% at source people received a lot less than normal for the same reason). The amounts due and payable in January could be financially difficult for many.

There are also those who deferred POA’s for 2020/21…….

jmb1

Ok thanks for your help all. I didn't claim seiss 4 & 5. But I guess then I need my accountant to return from hols and instruct how much I can reduce payments on account without incurring interest.