Payment on account query

swanny65

I am full time PAYE and part time Self Employed. Made my first self employed profit in 2006/7.

I have started to complete my 2007/8 tax return and on the provisional figures i have entered i owe about £1000.00 tax for 2007/8 (on profit of £4800.00) I can't complete the return as i need my employers P11D and a couple of interest statements.

I thought if my PAYE earnings were 80% or more of my income i could pay my underpaid tax in my tax code for 2009/10 (which i do this year for 2006/7 profits) and i also didn't have to pay on account.

The estimated self assessment shows i will have to pay £500.00 on account on 31/01/09 and again on 31/07/09. Is this correct or can i ask to reduce my payment on account due to my high PAYE earnings?

I am a little confused but can see why the tax man might want his cash!!!

Regards

Regards

Mikeyorks

swanny65 wrote: »

I thought if my PAYE earnings were 80% or more of my income i could pay my underpaid tax in my tax code for 2009/10 (which i do this year for 2006/7 profits) and i also didn't have to pay on account.

The 80% rule is correct as regards payments on account. From HMRC :-

Currently, taxpayers within the ITSA regime are required to make two POAs towards their income tax liability for any year, unless:

• their income tax bill for the previous year was less than £500, or

• 80 per cent or more of the tax due was deducted at source.

The £500 referenced ... is now £1000. But I'm completely unaware of any similar rule that allows for self-employed income to be coded out. I was always under the impression that the £2000 rule for coding out (SA) underpayments ..... only applied to underpayments from a PAYE source (but identified by an SA Return)? However a quick look at HMRC only returns this :

For an SA taxpayer who wants their underpayment of tax collected through their tax code there is no legislation that requires us to do so. However, the Revenue will usually code out such underpayments in all cases provided that: i. The complete SA Return is received by the Department on or before 30 September and ii. The Balancing Payment is less than £2,000 and iii. The PAYE source will enable the whole underpayment to be collected in one year

..... which does appear to leave it a bit open? There's no 80% rule on 'coding out' ...... but I'm now a bit unclear on my long held belief that the 'up to £2000' can only be collected under PAYE if it arises from a PAYE source?

Failing other forum help .... ring the SA Help Line?

swanny65

Hi

Rang the SA helpline.

As my SE tax liability is more than £500.00 POA is automatically requested. I can ask to have it reduced to nil under the 80% rule but if i then owe tax HMRC could charge me interest on the amount owed. If i POA and pay too much then they will give me interest on the overpayment.

Oh well best i cough up.......

Mikeyorks

Apologies ... the £1000 new limit doesn't come in until 6th Apr 2009. However that's immaterial if 80% or more of your tax due is from PAYE .... as you're not required to make POAs under those circumstances. As here (under 'Current Law and Proposed Revisions':-

http://www.hmrc.gov.uk/pbr2007/pbrn28.pdf

swanny65

Thanks for that. Quite clearly I fall into para 4 of the notice.

It looks like the online SA system probably calculates my POA automatically as my current SA (SE) tax liability for 2007/8 will exceed the £500 / £1000 threshold and it cant know what my future PAYE will be.

Based on your notice I will request a nil POA, and refer them to this in the comments box on the the online form.

Thanks again

Mikeyorks

swanny65 wrote: »

Based on your notice I will request a nil POA,

If you're happy you meet the 80% criteria ..... sensible to go for that.