worried about reduced payment on account

designeditdesignedit

hello

I do the book keeping for a relative sole trader business. For 25/26 year, we had an accounant submit the SA return but this year I will be doing it as due to an injury, the workload (and income) has dramatically reduced and we are trying to reduce financial commitments - its a quite a simple SA using an online accounting software.

HOWEVER…. we are a little worried. At the time of submitting , there was absolutely no work booked in at all due to hospital advice to not work (back injury, physically demanding job) so I asked the accountant to reduce the payment on account to zero as it was looking very likely that the business would have to close. HMRC agreed this and we have paid the balancing payment for 25/26.

fast forward to today and there has been a slight improvement and he is back at work but on a very reduced workload and a very reduced income too. Howeverm wit being back and clients paying invoices, we are aware that the POA may now be payable,

SO… I have tried my best to get onto hmrc webchat as what we would like to do is set up a payment plan, we wont be able to afford the usual 50% in January but hopefully by the time the secnd installment would usually be due we could clear the amount.

When i have tried online with the 'time to pay'link on the SA account, it just comes up with 'you dont have anything to pay'.

How could I set up this as a payment plan? I am just a little concerned that even though I am trying to offer small payments, I might not be able to pay them!

sheramber

https://forums.moneysavingexpert.com/discussion/6685690/worried-about-reduced-payment-on-account

does this help?

https://www.gov.uk/pay-self-assessment-tax-bill/pay-weekly-monthly

Isthisforreal99

Amend the 26/27 POA's to what you think will be due then you can set up a payment plan.

LukeB_92

A couple of points that may help, including the one risk that has not been mentioned yet.

There is nothing for a Time to Pay arrangement to attach to at the moment, which is why the account says there is nothing to pay. Payments on account are only instalments towards the 2026-27 bill. Reducing them to nil did not cancel the eventual tax - it just means the whole 2026-27 liability, based on the work actually done, will land as a balancing payment once that return is filed, payable by 31 January 2028.

The point to be aware of is interest. If payments on account are reduced by more than the final figures justify, HMRC can charge interest on the shortfall back to the dates the instalments would have been due (31 January and 31 July 2027), even though nothing shows as payable now. A penalty should not arise where the claim was made genuinely on the information available at the time, so keep the notes and any paperwork from when the reduction was made, showing work was expected to stop completely - that is the evidence it was a reasonable claim at the time.

Rather than reinstating fixed instalments on fixed dates, the flexible approach is to make voluntary payments on account as invoices get paid, using the UTR as the payment reference, or to set the money aside separately each month. Voluntary payments just sit on the account against the eventual bill - there is no formal arrangement to default on if work dries up again, and anything overpaid comes back once the 2026-27 return is processed.

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/82160028#Comment_82160028

Payments on account now will be to the 25/26 year not 26/27. Its not clear if the OP is also confused about years and means their accountant did their 24/25 return or if they mean they did their return due by Jan 2027 very early.

The interest isnt a penalty and ive never seen any grounds for asking it to be waived unless it was an error by HMRC themselves or the one off government schemes lie for Covid. Only penalties can be asked to be waived for a "reasonable excuse" not interest. I mean you can ask to have it waived but they should expect the answer to be no.

Normally when you submit your return you have already worked most of the next financial year with it only running a further 2 months if you file just before the deadline. Personally would always wait until near the deadline before adjusting payments on account as that gives you 9 months real data and only 3 months prediction so can only get it so wrong.

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82160028#Comment_82160028

If you don't know what you are talking about then it's not a good idea to give 'advice'.

This part in particular "it just means the whole 2026-27 liability, based on the work actually done, will land as a balancing payment once that return is filed, payable by 31 January 2028" is complete nonsense.