Reducing payments on account

littlemoney

Almost at end of my self assessment having viewed the calculations and checked data entry multiple times.

I now have a page headed Payments on Account and asking

"Are you claiming to reduce your 2026-27 payments on account?"

I am not sure how to answer.

After taking the payments on account I have already made the balancing payment for 2025/26 is less than the payments on account I have already made.

But I am concerned by the by the warnings:

If I reduce by too much they will charge me interest

and I need to make sure the payments I make, by 31 January 2027 and 31 July 2027, will add up to your best estimate of your tax bill for 2026 to 2027.

I know interest rates are generally lower but I can't forecast dividends.

Advice would me much appreciated please.

Thank you for reading yet another long post from me. Without this forum I would be paying out another £500 to get my tax return done for me.

sheramber

Your payments on account for 26/27 will each be half the amount of your 25/26.

if you know that your 26/27 iiabilty will be less than the 25/26 liability you can reduce the payments on account accordingly.

you may have knowledge of a change of circumstances that will reduced liabilty.

If you do not know it will be less then do not reduce them.

You will make the first payment as calculated by. 31 January.

If you complete your 26/27 return before 31 July 27 you will be able to calculate whether your payments on account were too high and can reduce them at that time. Any excess paid in January will be credited to the July payment on account.

littlemoney

It's the same amount that HMRC have calculated as due for 2025/25 split into 2 equal payments due on 31 Jan and 31st July 2027.

However total payments I made on account earlier this year for 2025/26 for exceed the amount they have calculated I owe for 2025/26 so I don't owe anything for 2025/26. They owe me a refund for 2025/26 if I am understanding this correctly.

How do all these sums sort themselves out. I had assumed that if I had paid too much on account it would be refunded to me

At what point do my payments on account get offset against the tax due calculated in the self assessment and do I have to claim for a refund for the extra I have already paid for 2025/26.

I am still confused.

DRS1

You may find that any refund due for 25/6 is just set against the POAs for 26/7.

You previously said the balancing payment was less than the POAs but presumably you mean the total tax due was less than the POAs. If it is just the balancing payment that is less than the POAs then you won't be due any refund.

littlemoney

https://forums.moneysavingexpert.com/discussion/comment/82132618#Comment_82132618

Yes I do mean the total tax due is less the POAs made for 2025/26.. There is enough left to pay my first Payment on Account for 2026/27 and still be in credit with HMRC.

sheramber

The payments on account are based on the 25/26 amount due.

What you paid when is irrelevant to them.

If you haves paid more than the final bill then the extra will become a credit.

Once you submit your return and it is processed the actual figures will be available in your personal tax account. You will be able to see how it works out.

If you complete the question in the return that you wish to claim repayment of any overpaid amount and give your bank details any repayment due will be paid automatically.

DRS1

OK so you could claim a repayment of the overpaid tax for 25/6 and then pay the full POAs for 26/7 in Jan and Jul 27. Which gets you back to your original question of whether to try to reduce those POAs. If you are confident your tax bill for 26/7 will be less than the POAs then you could try to do that. But bear in mind that if you reduce the POAs by too much you will get charged interest.

LITRG

Hi OP. We published an article earlier this year on payments on account, which includes worked examples. You may find this helpful.

Tax bill higher than you expected? Don’t forget payments on account! | Low Incomes Tax Reform Group

Hope this is useful.

fuzzzzy

Personally I would be reluctant to reduce my payments on account in case I got it wrong and was charged interest.

This year because I thought I might be paying too much tax I got my act together and submitted my 25/26 return in July (the previous 2 years had been last minute January jobbies). Getting it in before the deadline for the second POA on 31 July meant that the POAs were recalculated and so I had less to pay for the second POA and have no balancing payment next January.

sheramber

https://forums.moneysavingexpert.com/discussion/comment/82136451#Comment_82136451

That is the safer way to do it unless you KNOW rather than guess that you will be liable to pay less.

lrhassall

I've just been stung for casually reducing my payments on account without realising the consequences of underpaying.

If your honest prediction of tax for the following year turns out too low it's on you to recalculate and over-pay the HMRC Jan/July invoices. HMRC won't prompt you at all, even when submitting the tax return. By then it's already too late and weeks later you'll get hit with a bill with interest back to Jan.

This is especially annoying when it's savings interest. You're being punished for not paying tax in on savings interest you haven't fully earned/collected yet and would normally be paid the following year.