Self-Assessment Payment on Account
We have explained Payment on Account in a previous post/blog.
We did make it clear the requirements and importance
This is an urgent reminder to ensure that if you have received a letter from HMRC or advised by your Accountant or Tax Advisor to arrange second payment on account by 31 July 2023 then this will need to be paid.
It is quite difficult currently to request to arrange "Time to Pay" as HMRC Self-Assessment Line is closed until September 2023, however your Accountant or Tax Advisor as the registered Authority can call on your behalf but usually it requires the Taxpayer to arrange this directly in order to provide their bank details to set up a monthly arrangement.
HMRC assume that the tax due in the year will be similar for the following year and expect payment on account
Simple example 👇
If tax was due of £1,750 for the Tax Year 21-22 then this would have been due by 31 January 2023 plus £875 (£1,750/2) = £2,625
Then the second payment on account 22-23 £875 will be due 31 July 2023
The payment on accounts would then would be treated as payments in advance for the Tax Year 22-23, which will be due anytime after 6 April 2023 but before 31 January 2024, which will then determine whether under or overpaid tax then the payment on account for the following year will continue if the tax due is over £1,000
Please bear in mind that if there is no tax due or a tax refund as the estimated tax for the following year was much higher than a payment on account will not required.
Also if a taxpayer already has 80% or more tax deducted from payroll or other income then payment on account will be not be required.
If payment on account is not paid on the agreed dates then please be aware that
- HMRC will apply late interest on when the tax payment should have been arranged
- Worst case scenario decide to open a Tax Enquiry to assess the reason for the missed payment and to check if the Tax Returns being completed are accurate but these under extreme circumstances
Please feel free to reach out if you require further information or assistance in arranging payment on accounts or assistance with completing your Self-Assessment Tax Return
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