Pay self assessment tax through tax code

Jonah01

Hi guys,

Just to make sure I know what I am talking about.

I have a tax liability for 20/21 of £2666 all done via self assessment.

I normally do my own tax returns and in the past where my liability has been approx £500 I have opted to pay it through my tax code the following year. 

This year our company accountant has handled my return. I thought as the amount owed is less than 3k I can still put this through my code? They disagree. Something about because there is a payment on account??

Details are

Liability for 20/21 £2,666.

As such, the total amounts payable are £3,999.37 on 31 January 2022 and £1,333.13 due 31 July 2022.

Any help would be appreciated.

Thanks 

Dazed_and_C0nfused

I think your company accountant is getting a bit confused.

They need to think of each element separately, you owe £2,666 for 2020:21 which, if your return is filed by 30 December 2021, and you are earning enough to support collection of the £2,666 via your 2022:23 tax code, can be collected by an adjustment to your 2022:23 tax code.

Payments on account for 2021:22 cannot be collected via your 2022:23 tax code.

But payments on account for 2021:22 are based on the amount you have to pay direct to HMRC.  So if the 2020:21 liability is collected via your tax code you won't be paying anything to HMRC and the POA will be reduced to £0.

NB.  Providing the 2020:21 is collected via your 2022:23 tax code the removal of the POA for 2021:22 will be permanent, whatever liability your 2021:22 return shows will be a Balancing Payment for 2021:22, it won't result in the POA being reinstated.

I suspect a normal accountant would be aware of this, less reason for the company accountant to understand it as they won't generally deal with personal tax.

Jonah01

Thank you for explaining. I thought I was right but when speaking to the experts and they say something different it does make you doubt yourself. 

The liability has come as a bit of a surprise (won't bore you with the details) so I need to avoid the 4k in January if I can. 

Dazed_and_C0nfused

Paying it through your tax code is a bit like an interest free loan from HMRC really.

You will usually pay 1/12th of it at the end of April 2022 (or whenever your first pay day is in the tax year) and the final 1/12th at the end of March 2023.

A couple of things you may find useful.

You don't need to do anything for this to happen, just make sure your return is filed by 30 December and the right box is ticked (or not ticked) so the tax can be included in you're tax code.

When you eventually come to do your 2022:23 tax return HMRC will add £2,666 to the amount you have to pay for that year.  That is correct and should be evened out by the extra £2,666 tax that will be included in the tax deducted amount on your P60 for 2022:23.

Jonah01

Thanks. I'm pretty sure I know the answer to this but you aren't able in anyway to back date SIPP contributions are you?

Slight confusion over my dividend amount last year so would have been better if I had pushed some money into my SIPP to reduce my tax liabilities. 

Dazed_and_C0nfused

No, you can only ever get tax relief on pension contributions for the tax year you made the payment in.

If you haven't yet submitted your return then it might be worth reading the Gift Aid section and accompanying notes.  That could be a (financially) beneficial read.