Tax Action tips: Review your Payments on Account
More Tax Action tips from TaxCalc! This time it’s reviewing your payments on account…
If you are currently making payments on account under the self-assessment scheme the default position is that they are based on the previous year’s tax bill.
If your taxable income is increasing year on year then there is no need to review them as you will simply have a balancing payment to make when finalising your tax bill. However, if your taxable income has reduced which in the current climate is becoming more common you can end up overpaying your tax bill because of the payments on account.
You can make a request to reduce your payments on account either on your tax return or by submitting a form SA303, so that you can retain the money. Rather than waiting until you have finalised your tax return to claim the overpayment.
You should make sure you reduce your payments on account to a realistic amount though, as if you reduce your amounts and it results in an underpayment, HMRC can charge you interest on the underpaid amount.