Reducing HMRC Payments on Account

BreakingGlass

A quick bit of background: Having filed my Self-Assessment Tax Return for TY24/25 last May, I am faced with a Self Assessment 'Payment Due' of approx £3000, of which £2000 is income tax for TY24/25 and the remaining £1000 being the first payment on account for TY25/26. A further £1000 'payment on account' is due by 31 Jul 26.

My taxable income has reduced for TY25/26, so on Friday last week (23 Jan) I applied online to reduce my first payment on account to just £100. However, as at today, HMRC's 'Form Tracker' still shows my application as 'in progress' hence my 'Payment Due' has not yet reduced.

My questions are as follows:

• Am I being over optimistic in expecting my application to reduce payments on account being actioned/approved in a one-week timeframe, especially at what is HMRC's busiest time of year? (Search results state 72 hours being the typical processing time, but that 'some users' are reporting 2-4 weeks).

• If I pay the full £3000 (£2000+£1000) before the 31 Jan 26 deadline, and my application is subsequently approved, do HMRC issue a refund of the £900 that I have effectively overpaid? If so, when can I expect this, and do I have to actually apply for such a refund?

I realise that I left my application very late and am not particularly fussed about the outcome, but am interested in the process and the experience of others.

Many thanks!

MyRealNameToo

I've done it once, but via our accountants. I remember it being quick but it was much earlier in the financial year so HMRC no doubt less busy.

My financial fortunes changed and my circumstances changed meaning that my payments on account were too little and as well as having to make the shortfall (expected) I also had to pay interest on the short fall which I hadn't expected.

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/81858386#Comment_81858386

Thanks - I'd rather chase a repayment than pay interest, so I had erred on the side of caution when asking to reduce to £100.

refluxer

https://forums.moneysavingexpert.com/discussion/comment/81858397#Comment_81858397

I'm a relative newcomer to Payments On Account but my understanding is that if you ask to reduce your payments, they accept the new figure and then it turns out that you owe them more than the total amount you reduced it to, you will then owe interest on the difference.

With that in mind, I guess you're going to need to be really sure that you'll owe HMRC less than £200 for the 2025-26 tax year, otherwise it'll end up costing you more with the interest that will be due.

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/81858501#Comment_81858501

I am very sure! I just have to be careful not to close any savings accounts (thus realising the interest) between now and 6 April.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81858524#Comment_81858524

You are aware that the reason for the liability is irrelevant.

If you owe more than £200 then you would be charged interest on late payment irrespective of why you owed more.

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/81858577#Comment_81858577

Thanks - yes. Savings interest is my only taxable income.

BreakingGlass

It's been a week since my online application to 'reduce payments on account', and HMRC's Form Tracker still states 'in progress'. Hence, with the impending 31 Jan 26 payment deadline, I have just paid the higher amount of approx £3000.

I am still interested in finding answer to the two questions in my opening post. In particularly, I would like to know how HMRC will now address such an 'overpayment' if they now approve my application for a reduction. Will it have to wait until I complete my next tax return?

DRS1

For some reason the computer at HMRC thought I had overpaid some of the tax this year. So I had a figure showing up against the words You have overpaid and underneath that a link to click for getting a repayment. I imagine this is what you will see if they allow your application to reduce the payments on account. Maybe it will be for £900 or maybe £800 (with nothing due in July). I don't know. But I think you will need to apply for the repayment and it won't be automatic.

How long it will take for any repayment to come through is anyone's guess.

I suppose you might want to wait before applying for a repayment until you do your 25/6 tax return if you are one of those who submit it on 7 April? I think I have seen it suggested that an early return like that can have an impact on at least the second payment on account.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81861951#Comment_81861951

HMRC won't "approve" your application.

Assuming it is valid request they will just process it and reduce your POA as requested.

You can ask for any credit to be refunded to you but you won't be paid any repayment interest in this situation. And I cannot imagine it will be automatically refunded.

BreakingGlass

https://forums.moneysavingexpert.com/discussion/comment/81862702#Comment_81862702

Thanks for that. Yes I'll monitor HMRC to see what they say about reducing payments on account in the coming weeks. Whatever the outcome I'll do my 25/26 Tax Return May/June once I have the exact interest figures; so that will be well before the second payment on account is due, if indeed they still want it. I'll update back here for those who are interested.