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Reduce payment on account to £0?
fistfulofsteel
Posts: 47 Forumite
in Cutting tax
I'm self employed and in self assessment.
According to HMRC I owe £1300 in January as a payment on account. Based on the last 6 months, I'm expecting to have income this tax year of between £5,000 and £9,000 (hopefully around the higher end!) from work plus about £1,000 in non-ISA savings interest, which I think means I won't owe any tax?
Can I reduce my January payment on account to £0? Or will I still owe HMRC something for NI, or something else I've forgotten about?
If work unexpectedly picks up and I end up earning more, will that cause a problem or will HMRC just ask me to pay the difference next year?
Is there a deadline for requesting the reduction? Does it need time to process before January 31st?
According to HMRC I owe £1300 in January as a payment on account. Based on the last 6 months, I'm expecting to have income this tax year of between £5,000 and £9,000 (hopefully around the higher end!) from work plus about £1,000 in non-ISA savings interest, which I think means I won't owe any tax?
Can I reduce my January payment on account to £0? Or will I still owe HMRC something for NI, or something else I've forgotten about?
If work unexpectedly picks up and I end up earning more, will that cause a problem or will HMRC just ask me to pay the difference next year?
Is there a deadline for requesting the reduction? Does it need time to process before January 31st?
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Comments
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Partial answer: You can apply to reduce your payment on account to £0 if you don't expect to owe any tax (I've done this).
It took them about a month I think to process the request.
If you end up owing tax, they can charge you interest between when you would have made a payment on account and when you actually pay it.
Credit card debt: £8530 £8071
Savings: £33632 -
I reduced mine by 80% but only when I was certain I wasn’t going to need it.You could reduce by 50% to give some wiggle room.0
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If you reduce your payment on account to nil but when you submit your return it turns out that you are due e.g. £500 the payments on account will be reinstated to £250 each and you will be charged interest from the date the payments were due I.e. Jan and July, up to the date they are paid.
You could pay the January POA and submit your return before the July payment is due. Any reduction in the amount will be done automatically and any overpayment repaid.
So, if you not due to pay any tax the January payment on account will be repaid.0 -
I know I'll get it back but I'd rather keep it in my account if possible!
As long as my income is under the personal allowance, there's nothing I've forgotten about that will make me owe HMRC money, is there? Student loan is a higher threshold for repayments. NI is treated as paid as long as I'm over £6000-something? Savings I should be allowed to earn up to £5,000 interest without paying tax because my income is low? That covers everything, I think?0 -
Well that's what HMRC want too! Remember this was paid as you earned then they'd receive it throughout the year rather than in month 10 and 16 effectively.fistfulofsteel said:I know I'll get it back but I'd rather keep it in my account if possible!
So its just about how good your income estimate ends up being - if correct and you adjust your payment on account to that (even if that's £0) then no problem. If you end up earning more than estimated and hence owing more tax than the reduced payment on account, then they charge you interest. The rationale being they want to avoid people falsely claiming their income is reducing and hence not have the tax money until the tax return is submitted in month 20 effectively.0
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