Payment on account for tax

[red_slr]

I have had a letter today from Er Maj saying I owe some tax for 19-20 and its on account - due to be paid 5th April.

I have had a look online and quite a bit of the info refers to self employed, which I am not.

Is this "payment on account" correct? I have been doing SA since 2003 and never had this before.

[SS2.]

What proportion of your earnings is taxed via PAYE ?

[red_slr]

Is dividend earnings? That's what might throw it then, as I had an unusual bonus which I took as div last FY which would explain it.

[PhilboSE]

Yes, HMRC assume that any income last year will be repeated this year, so you owe tax on account for the similar dividend they think you will take this year.

You can apply to declare last year was exceptional and won't be repeated this year ergo no payment on account is appropriate, however if you do this and then you have any additional income of any sort then HMRC will come after you for a back payment with a shipload of interest added.

[SS2.]

red_slr said:

Is dividend earnings?

Dividends are, yes.

If it was fairly chunky (ie >20% of your total earnings), that'll be why they've asked for payment on account.

If you think it was a one-off, you can ask for the amount to be reduced. Be wary, though - if you then go and draw a similar amount / proportion through dividends in that tax year, HMRC will likely come after you for interest on the account payments which weren't made.

[red_slr]

Ah, that would explain it then. I took an additional dividend at the end of last year due to an unusual job we did which brought in a chunk of profit which was very much a one off so I guess that's whats tripped this. Thanks guys, I will give them a call and tell them it was a one off and see what they say.

[clockworks]

I went fully self-employed last November (sole trader), so no PAYE income where they could take the tax I owe by reducing my tax code. I phoned HMRC, and they said I should just put some money aside to pay them when they have checked my self-assessment. Going forward, it will likely be £3 or 4k p.a.

I asked about making payments on account, and the chap said I could if I wanted to, but there really wasn't any point - just wait for the bill, and earn some interest in the meantime.

Is it different for sole traders?

[Jockman]

If you submit your 18-19 Tax return on 6th April like many of us do then you should receive a prompt rebate.