Demand for payment now for possible tax in 2007/2008 year

BlueVinney

I'm now retired but during tax year 2006/2007 I received an exceptional payment from a previous employer which had standard rate tax deducted at source. This payment took me into the higher rate tax band for that year. For year 2007/2008 I'll again only need pay tax at the standard rate.

When I completing my self assessment tax return I included details of this additional payment and anticipated that I would have an tax liability for any income which fell into the higher tax bracket. The tax calculator duly showed the correct amount owing, which is due 31 January.. What I didn't expect was that it also calculated an equal payment due for the the 2007/2008 tax year and has added a requirement to pay 50% of this on 31 January and the balance on 31 July 2008.

What have I done wrong in completing my tax return or, at least , what should I do so that I don't need to pay the advance for 2007/2008 tax year?

Thanks for any advice.

HardupandParishDamned

You haven't done anything wrong, but you do need to fill in a form which should enable you to reduce these 'payments on account' to zero. The current system assumes you will aslo owe tax for the following year, unless you tell them otherwise. The form is here:- http://www.hmrc.gov.uk/sa/forms/sa303.pdf

Mikeyorks

BlueVinney wrote: »

What have I done wrong in completing my tax return or, at least , what should I do so that I don't need to pay the advance for 2007/2008 tax year?

Don't quite know what you did wrong .. never happened to me whilst doing a (PAYE) SA return. It's somehow assumed the payment creating the underpayment is now an annual treat!

However .... you need to apply to reduce the interim payments (POA1 and POA2) to £zero. If you had a paper return delivered there's probably a form in the pack? If not give them a ring and they should do it over the 'phone (you really need to write - but they won't process it in time for 31/1. They allegedly filter out priority stuff from the post backlogs - but it's more miss than hit) - whilst probably requesting a confirmatory letter.

Hoddie_2

POA can be reduced over the telephone. You need to be absolutely clear that there will be no tax liability for 2007-08 (other than what's deducted at source) before you reduce to nil, as HMRC will charge interest if it later shows you should have paid.

BlueVinney

Thanks for your help.

A phone call to my tax office (saynoto0870 worked) informs me that I should submit my return, wait 24 hours then phone again and they will adjust the figures to remove the ' payment on account' which has been calculated.

Mikeyorks

Wish I could reduce my PAYE that way. I wouldn't mind the odd half hour on 0870