£907 tax bill is saying I owe 'payments on account'

user67340348

My self assessment tax bill has come to £900-ish after filling out my self assessment (although I still need to check I've entered everything properly)

But it's saying I also have to pay 'payments on account'.

I don't understand why? I thought my tax bill had to come to over £1000 in order for me to be eligible for payments on account?

Also, is there a way to opt out of 'PoA'? As I will be doing very little freelance work this year (most of my income comes from my full-time job).

So if I pay PoA, I will most likely end up getting it refunded further down the line, so would just be a lot of unnecessary hassle.

Dazed_and_C0nfused

No, you can't "opt out" of POA.

But if you believe that they will be more than the amount that will actually be due you are able to make a claim to reduce them to the amount you think is correct.

Each POA must be the same so if you think £300 will be payable then you reduce them to £150 (each).

If for any reason (and it is ANY reason) the amount actually due is more than your figures the original POA will be reinstated and you wil be charged late payment interest from the normal due date to when you eventually pay the increased amounts.

However, the POA can't be increased to more than the actual liability of the year so if you reduced them to £150 (each) but actually owed £650 in total then each POA would become £325.

Are you sure you aren't getting your tax years mixed up?  What exactly does the part of the calculation you are looking at state?

[Deleted User]

Dazed_and_C0nfused said:

No, you can't "opt out" of POA.

But if you believe that they will be more than the amount that will actually be due you are able to make a claim to reduce them to the amount you think is correct.

Each POA must be the same so if you think £300 will be payable then you reduce them to £150 (each).

If for any reason (and it is ANY reason) the amount actually due is more than your figures the original POA will be reinstated and you wil be charged late payment interest from the normal due date to when you eventually pay the increased amounts.

However, the POA can't be increased to more than the actual liability of the year so if you reduced them to £150 (each) but actually owed £650 in total then each POA would become £325.

Are you sure you aren't getting your tax years mixed up?  What exactly does the part of the calculation you are looking at state?

Definitely something strange! Even if the liability was over £1000 it is likely that over 80% of total liability will have been paid at PAYE if most of the income comes from the op’s full-time job. 

user67340348

Dazed_and_C0nfused said:

No, you can't "opt out" of POA.

But if you believe that they will be more than the amount that will actually be due you are able to make a claim to reduce them to the amount you think is correct.

Thanks, I'll look into reducing them

Also, my profit was only around £2K for self employment, so £900 tax would be almost 50% of my earnings... perhaps I need to fill the form out again and make sure I've entered everything correctly.

purdyoaten2 said:

Definitely something strange! Even if the liability was over £1000 it is likely that over 80% of total liability will have been paid at PAYE if most of the income comes from the op’s full-time job. 

Thanks, I'm not too sure what you mean though sorry 🙂 what is 80% of total liability?

user67340348

Oh hang on a minute... I dont think it's saying I owe POA at all! See below

I think it just threw me when I saw the 'Plus First payment on account for 2022-23...' heading on there

I'm still confused however at how I owe over £900 tax when my profit was only around £2000

[Deleted User]

If more than 80% of your total liability is paid at PAYE you will not have payments on account. If your total bill, for example is £4000 and you have already paid £3201 at your employment, no POA will be due. 

In your case, try fiddling with the self employment figures to make the profit zero and see what the calculation says. If you still owe it will be as a result of too little tax deducted at your employment. Have you perhaps omitted employment expenses, for example?

Dazed_and_C0nfused

user19860331 said:

Oh hang on a minute... I dont think it's saying I owe POA at all! See below

I think it just threw me when I saw the 'Plus First payment on account for 2022-23...' heading on there

I'm still confused however at how I owe over £900 tax when my profit was only around £2000

A Self Assessment return isn't to establish the tax due on self employments, it's to establish the total amount due for the year after deducting any tax paid during the year such as on employment income.

There is nothing unusual about owing money when on PAYE.

But as purdyoaten2 suggest maybe you haven't completed the return accurately yet?

Grumpy_chap

£900 tax on £2k is 45%.  Are you in the additional rate band?

user67340348

Grumpy_chap said:

£900 tax on £2k is 45%.  Are you in the additional rate band?

I was thinking that might be the case, as I had some hassle with my new job and the tax code.

But I've just had a look at my PAYE account and think everything looks normal?

user67340348

Dazed_and_C0nfused said:

There is nothing unusual about owing money when on PAYE.

Do you mean I might have underpaid my tax in my job? That wouldn't surprise me really, as the accounts guy in my previous job (which I left in the summer) was bloody useless

Dazed_and_C0nfused

You could try purdyoaten2's suggestion as this will highlight the reasons you owe £907.

Starting with anything owed just on all your income except the self employment.  Then add in the self employment go get to £907.

In your case, try fiddling with the self employment figures to make the profit zero and see what the calculation says. If you still owe it will be as a result of too little tax deducted at your employment. Have you perhaps omitted employment expenses, for example?