Question about paying tax in advance?

icicat

Hi all,

So my last tax return I was shocked having to additionally pay for the next tax year upfront. As you know it asks for two payments (to make them more manageable I guess, seeing that the money hasn't even been earnt yet!) so I paid the first instalment. Now the second payment is due end of this month. I might try to do my self assessment before it is due just in case my calculation is less than what they predicted (based on what I earnt last year)

So the question is, if I fill in my return and the calculation is less, can I just pay that in (minus the first payment I already paid in) and just ignore the amount of the second payment? Or does HMRC still require you to make the second payment and they either owe me any overpayments or I add any overpayment to next years tax bill?

I still find it so confusing and unfair that they ask for advance payment for next years tax

Dazed_and_C0nfused

(to make them more manageable I guess, seeing that the money hasn't even been earnt yet!)

You've got your dates mixed up, the first POA is never payable before at least 9 months of the tax year have passed!!

For example POA for 2021:22 are payable on 31 January 2022 and 31 July 2022.  If you are on PAYE you could have paid some tax for 2021:22 on 6 April 🙂.

If you owe less then each POA will be amended to reflect that and anything overpaid in January will be allocated to the July POA.

If you post some rough figures it's easier to explain.

How much each POA currently is and what you think your Self Assessment return might show is due.  Note you do NOT deduct the POA when considering your Self Assessment calculation.

DE_612183

you can adjust yourself what the payment is - not sure where but if you go onto the personal tax account it's there somewhere.

icicat

ok thanks guys. I'm still confused by it all as it's the first time POA come up in my tax return (probably because I earnt more 20/21) so here are some figures:

Total amount due for 2020-21 £2,583.40

Plus

First payment on account for 2021-22 £1,291.70
Second payment on account for 2021-22 will be due by 31 July 2022 £1,291.70

So I assume they are predicting what I owe for 21/22 tax year will be the same as 20/21. So say I have payed the second instalment, then I fill in my self assessment for 21/22. At the calculation does it automatically deduct what I have already paid in POA?

Dazed_and_C0nfused

No, you never deduct the POA anywhere in your return.

What do you think the calculation will show in the place where it was £2583.40 last time?

[Deleted User]

icicat said:

ok thanks guys. I'm still confused by it all as it's the first time POA come up in my tax return (probably because I earnt more 20/21) so here are some figures:

Total amount due for 2020-21 £2,583.40

Plus

First payment on account for 2021-22 £1,291.70
Second payment on account for 2021-22 will be due by 31 July 2022 £1,291.70

So I assume they are predicting what I owe for 21/22 tax year will be the same as 20/21. So say I have payed the second instalment, then I fill in my self assessment for 21/22. At the calculation does it automatically deduct what I have already paid in POA?

Most of what you have said is correct. However - two points. 

The payments on account are not predictions - they are exactly half of the previous years liability.

On your final sentence - YOU deduct the payments on account made. The calculation is just that - a calculation of your final liability. As such it will not show the payments on account already made. You will have made payments towards that bill - take them into account. 

If you can complete your return by the end of the month you may find that the 31 July payment can be reduced, depending on your liability of course.

icicat

Got it, thanks purdyoaten2. So what if the POA outway the final calculation (so if I didn't earn as much this year?) Can that excess go towards the next POA for 22/23?

[Deleted User]

icicat said:

Got it, thanks purdyoaten2. So what if the POA outway the final calculation (so if I didn't earn as much this year?) Can that excess go towards the next POA for 22/23?

Using your example of payments on account of  £1291.70 each. 

You complete your return and it shows £2000 due for the year. 

You now owe £708.30  (£2000 less what you paid as payment on account in January of £1291.70) and you pay that on 31st July.

Dazed_and_C0nfused

But each POA will be £1,000, not £1,291.70 January) and £708.30 (July).

So HMRC will add a small amount of interest to the £291.70 overpaid in January.

[Deleted User]

Dazed_and_C0nfused said:

But each POA will be £1,000, not £1,291.70 January) and £708.30 (July).

So HMRC will add a small amount of interest to the £291.70 overpaid in January.

Of course but I was simply stating the payments position. In practice one would  fill in a SA303 to that effect but I didn’t want to further complicate matters if the op was completing the return this week. If not an SA 303 should be completed to reduce each POA to £1000.

icicat

got it. Though would that mean I only pay back £583.4 (instead of £708)? (both payments come to 2,583.4 so deducting the 2000) **Edit** sorry I misunderstood that

So say I do my tax return next month and I've already paid the second instalment, and my calculation comes to £1000 for 21/22. So now I have already paid £2,583.4 meaning I have overpaid tax, what happens with the overpayment?