Self assessment question
Discussion
I've just filled in my self assessment and am slightly confused by the final calculation.
I was PAYE for part of the year, and had some additional income that I'm expecting to pay tax on.
The calculation works out how much tax I should pay on the whole lot (PAYE and Other income), then subtracts the tax I've already payed via PAYE, to give a "Total Income Due" figure that looks right to me.
But then it says
I was PAYE for part of the year, and had some additional income that I'm expecting to pay tax on.
The calculation works out how much tax I should pay on the whole lot (PAYE and Other income), then subtracts the tax I've already payed via PAYE, to give a "Total Income Due" figure that looks right to me.
But then it says
HMRC said:
Estimated payment due by 31 January 2020
You must pay the total of any tax and class 4 NIC due for 2018-19 plus first payment on account due for 2019-20 by 31 January 2020
(Note: 2nd payment of £1,840.70 due 31 July 2020)
This amount does not take into account any 2018-19 payments on account you may have already made
2018-19 balancing payment £3,681.40
1st payment on account for 2019-20 due 31 January 2020 £1,840.70
Total due by 31 January 2020
£5,522.10
Can anyone explain what the extra £1840.70 is about? Are they assuming some additional earnings for the next year and asking for part payment now? I'm not expecting to be getting that extra income next year so was assuming I'd just pay what's owed this year and then pay anything due next year on next years return.You must pay the total of any tax and class 4 NIC due for 2018-19 plus first payment on account due for 2019-20 by 31 January 2020
(Note: 2nd payment of £1,840.70 due 31 July 2020)
This amount does not take into account any 2018-19 payments on account you may have already made
2018-19 balancing payment £3,681.40
1st payment on account for 2019-20 due 31 January 2020 £1,840.70
Total due by 31 January 2020
£5,522.10
Thanks. So where does that get accounted for on the next years return?
Looking at last years return I didn't pay any on account, presumably because the previous years was low enough, but I can't see where I would enter it I had paid some.
ETA:
Aha, forget that, Followed the link on the page you posted to change it and it let me set it to 0. thanks
Looking at last years return I didn't pay any on account, presumably because the previous years was low enough, but I can't see where I would enter it I had paid some.
ETA:
Aha, forget that, Followed the link on the page you posted to change it and it let me set it to 0. thanks
Edited by RizzoTheRat on Monday 9th December 18:29
It's an option - not a compulsion.
If expected income in the next tax year is not known for sure, then reducing the Payments on Account may be less desirable. However, if you over reduce and you do get charged interest, that's all that will happen. HMRC don't issue penalties or fines in respect of Payments on Account - so in some ways you can treat it as a form of government loan.
And also don't forget that the first payment on account is payable in January. HMRC thinks that, by January, people should have a reasonable idea how their income for the tax year will pan out. By the time the second payment on account is due in the following July, they really should know by then.
Example -
A person completes their 2018/19 tax return. It indicates that the payments on account for 2019/20 will be £2,000 each. The first 2019/20 payment on account is payable on 31 January 2020. That is 9 months into tax year 2019/20 - so the taxpayer should have a good idea as to what their 2019/20 income is going to be as the tax year ends only 12 weeks later. By the time the second 2019/20 payment on account is payable on 31 July 2020, the 2019/20 tax year has already ended and we are 3 months into 2020/21
If expected income in the next tax year is not known for sure, then reducing the Payments on Account may be less desirable. However, if you over reduce and you do get charged interest, that's all that will happen. HMRC don't issue penalties or fines in respect of Payments on Account - so in some ways you can treat it as a form of government loan.
And also don't forget that the first payment on account is payable in January. HMRC thinks that, by January, people should have a reasonable idea how their income for the tax year will pan out. By the time the second payment on account is due in the following July, they really should know by then.
Example -
A person completes their 2018/19 tax return. It indicates that the payments on account for 2019/20 will be £2,000 each. The first 2019/20 payment on account is payable on 31 January 2020. That is 9 months into tax year 2019/20 - so the taxpayer should have a good idea as to what their 2019/20 income is going to be as the tax year ends only 12 weeks later. By the time the second 2019/20 payment on account is payable on 31 July 2020, the 2019/20 tax year has already ended and we are 3 months into 2020/21
2.5%
If your tax liability for the tax return year you have just completed is under £1,000, there is no Payment on Account required for the following year. If it turns out that the next year's real liability is higher than £1,000, that doesn't matter. There are no interest charges or penalties levied.
The problem is cash flow. If you had no payments on account to pay for (say) tax year 2018/19 but when you actually calculated the 2018/19 tax liability (when completing your actual 2018/19 tax return) to be £5,000, then all of that £5,000 has to be paid on 31 January 2020. In addition, the 1st payment on account for the next year of £2,500 will also be payable on 31 January 2020 - meaning you have to fork out £7,500 on 31 January.
Of course, you can reduce the £2,500 payments on account if it is the right thing to do.
If your tax liability for the tax return year you have just completed is under £1,000, there is no Payment on Account required for the following year. If it turns out that the next year's real liability is higher than £1,000, that doesn't matter. There are no interest charges or penalties levied.
The problem is cash flow. If you had no payments on account to pay for (say) tax year 2018/19 but when you actually calculated the 2018/19 tax liability (when completing your actual 2018/19 tax return) to be £5,000, then all of that £5,000 has to be paid on 31 January 2020. In addition, the 1st payment on account for the next year of £2,500 will also be payable on 31 January 2020 - meaning you have to fork out £7,500 on 31 January.
Of course, you can reduce the £2,500 payments on account if it is the right thing to do.
t quite frankly. It's not really in advance though is it, it's 9 months in to the year in which you earned it, so if you assume your earnings are spread out over the year it's several months in arrears.
I think it's a pretty good point made above that 9 months in to the year you should have a pretty good idea what your liability is going to be for the year.
I think it's a pretty good point made above that 9 months in to the year you should have a pretty good idea what your liability is going to be for the year.
RizzoTheRat said:
It's not really in advance though is it, it's 9 months in to the year in which you earned it, so if you assume your earnings are spread out over the year it's several months in arrears.
I think it's a pretty good point made above that 9 months in to the year you should have a pretty good idea what your liability is going to be for the year.
And in that 9 months let’s say your income drops to 25% of the previous year, one is still require to make payments on account reflected in that previous year. I think it's a pretty good point made above that 9 months in to the year you should have a pretty good idea what your liability is going to be for the year.
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