Interest on self assessment payment on account

Timaaeee

Dazed_and_C0nfused said:

Timaaeee said:

[Deleted User] said:

As before, a request to reduce payments on account are never refused. 

Hopefully you previous thinking as you have outlined has been updated. 

On your first point: 

2023/24 tax is due as follows:

First payment on account (if appropriate) on 31st January 2024.

Second payment on account (if appropriate) on 31st July 2024

Any balance due 31st January 2025. 

Nothing has changed regarding this in 27 years!

The payments on account are not ‘pre-emptive’ of 2023/24. Bear in mind that the second one is almost four months after the end of the tax year.

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

ok thanks for your help!

well what it actually says in the statement on 31st Jan is:

£1500   1st payment on account due for year 23/24

-£1500  claim to reduce 1st payment on account for year 23/24

£1300   Adjustment to 1st payment on account for year 23/24 from Return

and then similar in July

I was requested to pay the £1500 then I asked to reduce it to zero, I never remember being asked to pay this £1300 adjustment figure in either Jan or July?

thanks

You really are complicating things now.

In an earlier post you said the actual 2023-24 liability was £1,000.  But for the bits in bold to have happened it must have been £2,600.

I later realised that I had some investment earnings for 23-24 and owed about £1000 in tax which I paid immediately after submitting a return for that year.

Basically each POA was £1,500. 

You asked for them to be reduced to £0.

You then filed your return and each POA was reinstated to £1,300 (which was presumably based on your return showing liability of £2,600).

You cannot have filed the return until 6 April 2024 and as the first POA was payable on 31 January 2024 there is bound to be a late payment interest charge if you didn't pay the tax due until after you filed the return.

that £1000 was for my 23-24 return submitted in Jan 2025. Those 3 entries from the statement were all on 31st Jan 2024 so I presume is referring to the SA return for 2022-23 submitted in Jan 2024? 

I still don't understand why they asked me to pay £1500, then seem to have accepted my claim to remove the £1500 but then immediately replaced it with a new figure of £1300 but not asked for payment on that, and then did the same in July?

I'll have to write to them I think

TheSpectator

Timaaeee said:

Dazed_and_C0nfused said:

Timaaeee said:

[Deleted User] said:

As before, a request to reduce payments on account are never refused. 

Hopefully you previous thinking as you have outlined has been updated. 

On your first point: 

2023/24 tax is due as follows:

First payment on account (if appropriate) on 31st January 2024.

Second payment on account (if appropriate) on 31st July 2024

Any balance due 31st January 2025. 

Nothing has changed regarding this in 27 years!

The payments on account are not ‘pre-emptive’ of 2023/24. Bear in mind that the second one is almost four months after the end of the tax year.

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

ok thanks for your help!

well what it actually says in the statement on 31st Jan is:

£1500   1st payment on account due for year 23/24

-£1500  claim to reduce 1st payment on account for year 23/24

£1300   Adjustment to 1st payment on account for year 23/24 from Return

and then similar in July

I was requested to pay the £1500 then I asked to reduce it to zero, I never remember being asked to pay this £1300 adjustment figure in either Jan or July?

thanks

You really are complicating things now.

In an earlier post you said the actual 2023-24 liability was £1,000.  But for the bits in bold to have happened it must have been £2,600.

I later realised that I had some investment earnings for 23-24 and owed about £1000 in tax which I paid immediately after submitting a return for that year.

Basically each POA was £1,500. 

You asked for them to be reduced to £0.

You then filed your return and each POA was reinstated to £1,300 (which was presumably based on your return showing liability of £2,600).

You cannot have filed the return until 6 April 2024 and as the first POA was payable on 31 January 2024 there is bound to be a late payment interest charge if you didn't pay the tax due until after you filed the return.

that £1000 was for my 23-24 return submitted in Jan 2025. Those 3 entries from the statement were all on 31st Jan 2024 so I presume is referring to the SA return for 2022-23 submitted in Jan 2024? 

I still don't understand why they asked me to pay £1500, then seem to have accepted my claim to remove the £1500 but then immediately replaced it with a new figure of £1300 but not asked for payment on that, and then did the same in July?

I'll have to write to them I think

Get yourself an accountant/tax advisor as you have just ignored the excellent explanations already given - the main point being 'Self-Assessment' is exactly that. There was no 'acceptance' of your claim to reduce the payments on account. You were effectively stating you would not have a 23/24 tax liability and this was not the case clearly.

The interest is correct.

Timaaeee

ok thanks

sheramber

The payments on account were only amended to £1300 after your return was processed  to bring out  tax due of £2600. 

Late payment interest is immediately added. 

HMRC then notified you of the amended position.

HMRC could not know how much your  payments on account were until your return was processed. 

fuzzzzy

[Deleted User] said:

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

So if you make payments on account for the tax year 2024 to 2025 in Jan 2025 and July 2025 to cover tax on expected savings interest, but HMRC have also been collecting that estimated tax through PAYE during the year, if you end up having paid too much tax and are due a refund when you complete your self assessment for 2024 to 2025 does that mean you will be owed interest on the refund amount? If so what is the interest rate they pay?

eskbanker

https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates#current-late-payment-and-repayment-interest-rates

sheramber

fuzzzzy said:

[Deleted User] said:

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

So if you make payments on account for the tax year 2024 to 2025 in Jan 2025 and July 2025 to cover tax on expected savings interest, but HMRC have also been collecting that estimated tax through PAYE during the year, if you end up having paid too much tax and are due a refund when you complete your self assessment for 2024 to 2025 does that mean you will be owed interest on the refund amount? If so what is the interest rate they pay?

If HMRC have adjusted code to collect estimated tax due payments on account would not  be requested. 

fuzzzzy

sheramber said:

fuzzzzy said:

[Deleted User] said:

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

So if you make payments on account for the tax year 2024 to 2025 in Jan 2025 and July 2025 to cover tax on expected savings interest, but HMRC have also been collecting that estimated tax through PAYE during the year, if you end up having paid too much tax and are due a refund when you complete your self assessment for 2024 to 2025 does that mean you will be owed interest on the refund amount? If so what is the interest rate they pay?

If HMRC have adjusted code to collect estimated tax due payments on account would not  be requested. 

HMRC adjusted my tax code for 2024 to 2025 to collect untaxed estimated interest from savings through PAYE.

I did my first self assessment for the tax year 2023 to 2024 and paid my tax due in January 2025. This included a first payment on account for 2024 to 2025 with a second payment on account due in July. So I did feel they were trying to collect tax twice through 2 different systems and had intended to ring up and query this.

I did ring up last week when I got my tax code notice for 2025 to 2026 because they had included in the calculation untaxed interest for 2023 to 2024 which I had already paid through self assessment in January 2025! 

It seems that PAYE and Self Assessment don't communicate with each other?

They removed the untaxed interest for 2023 to 2024 from the 2025 to 2026 tax notice calculation. I did ask about the expected overpayment of tax for 2024 to 2025 and was just told that it would all get sorted when I did my self assessment for 2024 to 2025.

I suppose if I calculate my tax liability for 2024 to 2025 before July I could ask for my second payment on account to be removed/reduced but I'm rather reluctant I might get it wrong like the OP and end up being charged interest on an amount at over 7%. I think I'd rather wait until later in the year when HMRC have all my bank savings interest details finalised and I can cross check them myself before submitting my self assessment. So I am hoping I will get interest, albeit at a lesser rate, paid to me by HMRC for my over payments on account.

I still don't understand how this can happen though, how I can make a payment through self assessment in January and this not get communicated to PAYE before they calculate my tax notice in February.

Dazed_and_C0nfused

fuzzzzy said:

sheramber said:

fuzzzzy said:

[Deleted User] said:

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

So if you make payments on account for the tax year 2024 to 2025 in Jan 2025 and July 2025 to cover tax on expected savings interest, but HMRC have also been collecting that estimated tax through PAYE during the year, if you end up having paid too much tax and are due a refund when you complete your self assessment for 2024 to 2025 does that mean you will be owed interest on the refund amount? If so what is the interest rate they pay?

If HMRC have adjusted code to collect estimated tax due payments on account would not  be requested. 

HMRC adjusted my tax code for 2024 to 2025 to collect untaxed estimated interest from savings through PAYE.

I did my first self assessment for the tax year 2023 to 2024 and paid my tax due in January 2025. This included a first payment on account for 2024 to 2025 with a second payment on account due in July. So I did feel they were trying to collect tax twice through 2 different systems and had intended to ring up and query this.

I did ring up last week when I got my tax code notice for 2025 to 2026 because they had included in the calculation untaxed interest for 2023 to 2024 which I had already paid through self assessment in January 2025! 

It seems that PAYE and Self Assessment don't communicate with each other?

They removed the untaxed interest for 2023 to 2024 from the 2025 to 2026 tax notice calculation. I did ask about the expected overpayment of tax for 2024 to 2025 and was just told that it would all get sorted when I did my self assessment for 2024 to 2025.

I suppose if I calculate my tax liability for 2024 to 2025 before July I could ask for my second payment on account to be removed/reduced but I'm rather reluctant I might get it wrong like the OP and end up being charged interest on an amount at over 7%. I think I'd rather wait until later in the year when HMRC have all my bank savings interest details finalised and I can cross check them myself before submitting my self assessment. So I am hoping I will get interest, albeit at a lesser rate, paid to me by HMRC for my over payments on account.

I still don't understand how this can happen though, how I can make a payment through self assessment in January and this not get communicated to PAYE before they calculate my tax notice in February.

You have misunderstood a few things there.

HMRC haven't included the interest from 2023-24 in your 2025-26 tax code, they would never do that.  They had probably used the information from 2023-24, the latest currently available, as an estimated for 2025-26.

You cannot ask for the second POA for 2024-25 to be removed/reduced.  Each POA has to be the same (or to within a penny of each other).

You could make a claim to reduce both the 2024-25 POA to half of what you expect the 2024-25 Self Assessment liability to be.  But as you will have noted from this thread you are taking a risk of interest charges if you get this wrong.  The safest thing is to file your 2024-25 return before the 2nd POA is payable. 

This will mean both POA will be automatically adjusted to the correct figures if they need to be reduced because the 2024-25 liability is less.  You will be credited with interest for any overpaid tax you paid direct to HMRC for the 1st POA on 31 January.

fuzzzzy

Dazed_and_C0nfused said:

fuzzzzy said:

sheramber said:

fuzzzzy said:

[Deleted User] said:

You also should bear in mind that if, for example you had made the payments on account totalling £3000 and your liability transpired to be less than that, it would be HMRC paying you interest. 

So if you make payments on account for the tax year 2024 to 2025 in Jan 2025 and July 2025 to cover tax on expected savings interest, but HMRC have also been collecting that estimated tax through PAYE during the year, if you end up having paid too much tax and are due a refund when you complete your self assessment for 2024 to 2025 does that mean you will be owed interest on the refund amount? If so what is the interest rate they pay?

If HMRC have adjusted code to collect estimated tax due payments on account would not  be requested. 

HMRC adjusted my tax code for 2024 to 2025 to collect untaxed estimated interest from savings through PAYE.

I did my first self assessment for the tax year 2023 to 2024 and paid my tax due in January 2025. This included a first payment on account for 2024 to 2025 with a second payment on account due in July. So I did feel they were trying to collect tax twice through 2 different systems and had intended to ring up and query this.

I did ring up last week when I got my tax code notice for 2025 to 2026 because they had included in the calculation untaxed interest for 2023 to 2024 which I had already paid through self assessment in January 2025! 

It seems that PAYE and Self Assessment don't communicate with each other?

They removed the untaxed interest for 2023 to 2024 from the 2025 to 2026 tax notice calculation. I did ask about the expected overpayment of tax for 2024 to 2025 and was just told that it would all get sorted when I did my self assessment for 2024 to 2025.

I suppose if I calculate my tax liability for 2024 to 2025 before July I could ask for my second payment on account to be removed/reduced but I'm rather reluctant I might get it wrong like the OP and end up being charged interest on an amount at over 7%. I think I'd rather wait until later in the year when HMRC have all my bank savings interest details finalised and I can cross check them myself before submitting my self assessment. So I am hoping I will get interest, albeit at a lesser rate, paid to me by HMRC for my over payments on account.

I still don't understand how this can happen though, how I can make a payment through self assessment in January and this not get communicated to PAYE before they calculate my tax notice in February.

You have misunderstood a few things there.

HMRC haven't included the interest from 2023-24 in your 2025-26 tax code, they would never do that.  They had probably used the information from 2023-24, the latest currently available, as an estimated for 2025-26.

You cannot ask for the second POA for 2024-25 to be removed/reduced.  Each POA has to be the same (or to within a penny of each other).

You could make a claim to reduce both the 2024-25 POA to half of what you expect the 2024-25 Self Assessment liability to be.  But as you will have noted from this thread you are taking a risk of interest charges if you get this wrong.  The safest thing is to file your 2024-25 return before the 2nd POA is payable. 

This will mean both POA will be automatically adjusted to the correct figures if they need to be reduced because the 2024-25 liability is less.  You will be credited with interest for any overpaid tax you paid direct to HMRC for the 1st POA on 31 January.

Ok thanks for the info on POA but I think I will likely just let it go and submit my self assessment later in the year when I am more comfortable after checking my figures with HMRC.

On my 2025 to 2026 tax code notice they had included untaxed interest, which is an estimate of the interest I will receive during the year based on the previous year. But they had additionally included

"Tax you owe (earlier year)

We previously told you that you owe £xxxx from an earlier tax year. We have therefore included an adjustment to reduce your tax free allowance......."

 I had actually received a P800 dated 4 Feb 2025:

"Tax calculation for the year 6 April 2023 to 5 April 2024. You have paid too little tax. You owe HMRC £xxxx.
We will automatically collect the tax by increasing the tax deducted from your wages, salary or pension in equal instalments for 12 months from next April. "

I should have rang them up straight away but because I had just paid this exact amount on 30 January 2025 through self assessment I assumed their systems were just lagging a bit and I would subsequently get another notice saying I owed nothing. I had a receipt for the self assessment payment and my online tax account said I owed nothing. I forgot about it until I received the 2025 to 2026 tax code notice.

Perhaps my terminology is a bit off but it does seem that the earlier year they were referring to in the 2025 to 2026 tax notice was 2023 to 2024 which was the subject of the P800. As I said they removed this from the 2025 to 2026 calculation when I rang up.

It does not alter the fact that they seem to be treating me as if I had never done the self assessment until I rang them.