Contacting HMRC

dw3305

I deal with my mother's tax since she went into a care home a couple of years ago, and we started renting out her home.  So she had a new source of income, taxable.

In 2020/21 she was asked for, and made, payments on account in January and July 2021.  Her 20/21 tax return showed a small balance due, to go in her Tax Code for 2022/23.  So far so good.  Last month they sent her a new Tax Code which included a deduction for estimated property income and considerably increased the tax deducted from her work pension.  They also sent a Statement of Account showing no payment due.  That's fine as well.

But now they have sent a new Statement of Account demanding the same payments on account as last year.  This seems plainly wrong - they are already collecting it through PAYE.  Easily sorted by an email, one would have thought, but I can't find any way of sending them one.

Rather than submit to an ordeal by telephone I'm inclined to just pay up in January and make them an interest-free loan until I can get her 21/22 tax return in and get a refund.  Interested to hear what people think, or if there is any other option.  Thanks.

Dazed_and_C0nfused

Before doing anything perhaps you could clarify which tax year the POA on the new statement relate to?

I suspect they are for 2021:22 in which case you need to understand that POA are based on the prior years Self Assessment liability so any change to the current years tax code wouldn't impact them.

But you could make a claim to reduce them if you believe there will be less tax to pay for 2021:22 under Self Assessment.  It doesn't matter why there would be a difference, similarly if you reduced them and it turned out, for whatever reason, that the original amounts were correct them late payment interest will be charged on any amounts paid late.

dw3305

They are for 21/22.  They are clearly in respect of the rental income.  It just seems wrong in principle to charge POA as well as collecting tax on that income through PAYE.  Come April she will have paid significantly more tax than she should for 21/22.

Dazed_and_C0nfused

POA aren't in relation to a particular income source, they are based on the Self Assessment liability.

But if you are confident that no additional tax whatsoever will be payable under Self Assessment then you could make a claim to reduce them to NIL.

But if there was tax due for 2021:22 (for any reason other than Capital Gains Tax) then the POA would be reinstated and interest charged.

You might have found life simpler if you had opted out of having a tax code adjustment for the rental income in the first place?

sheramber

 Reduce payments on account by completing form.

https://www.gov.uk/government/publications/self-assessment-claim-to-reduce-payments-on-account-sa303

Is the deduction made in her coding sufficient to cover her income from property.? Remember if her code is only changed in December , the extra amount will only be collected for December, January, February and March.

She may still have tax to pay for the period from April to December.

dw3305

Thanks for this.

I've now done a projection of how much she might owe at the end of the tax year if she made no POA.  Her rental income looks as if it will be a fair amount higher than what they have assumed in her tax code, so if she makes one POA in January she will have overpaid come April, but not by all that much.  If I get her return in promptly everything should be sorted before the second POA is due in July, and I should be able to avoid having to contact HMRC altogether.

I wasn't aware that I could opt out of having a tax code adjustment.  I'll look into that for next year.

Dazed_and_C0nfused

There are a couple of options near the end of the return, one relates to collection of tax due for the tax year the return is for and the second is about using your current tax code to (provisionally) collect more tax for the current tax year.

Remember POA are always (give the odd penny) equal so if they are say £2,000 each and the return for 2021:22 shows £1,500 is payable they will each be reduced to £750, not £1500 (Jan) and £0 (July).

HMRC will automatically allocate payments to the July POA if you overpay in January.