If you are in the self-assessment tax system then you may be due to pay your second Payment on Account for the year-ended 5 April 2013 by 31 July 2013. That’s just under two months away.
Dependent on you circumstances, it may be possible to reduce that payment, or avoid it all together.
If any of these apply to you, then we can look at reducing your payment:
1. If you have done your tax return to 5 April 2013 and the actual liability is less than it was the previous year.
2. You do not need to make a Payment on Account at all if the tax liability on the 5 April 2012 tax return was less than £1,000, or if at least 80% of the tax due for 2011/2012 was paid at source (e.g. by PAYE).
3. If you have not done your 5 April 2013 tax return but expect the liability to be less than it was last year, then you can ask the HM Revenue & Customs to reduce the Payment on Account. But beware, if you should have paid the original amounts after all, you will have to pay interest and possibly penalties if HM Revenue & Customs think you didn’t have a good reason to reduce the payments.
4. It is too late to make pension contributions for the year to 5 April 2013, but if you have made a loss in a business since 5 April 2013, you may be able to carry those losses back to the 2013 tax year and reduce the tax liability and payments. Note that this applies only to sole trader and partnerships (including LLPs), NOT limited companies.
Notes
• The tax rules state that you must pay an estimate of your tax liability for the year to 5 April 2013. Half is payable on the 31 January 2013 and the other half on 31 July 2013.
• The total amount you have to pay is equal to tha actual liability for the year to 5 April 2012, although if the total liability for that year was less than £1,000, you don’t have to make any Payments on Account.
• Once you have worked out your actual tax liability to 5 April 2013, you can get an immediate refund of any overpayment (with interest). Any balance payable over and above the Payments on Account does not need to be paid until 31 January 2014.
• The Payment on Account applies only to income tax, not to any Capital Gains Tax (that’s payable on 31 January 2014).
• If you have done your 5 April 2012 tax return and you are due to make a Payment On Account on 31 July 2013, you should have been sent a payment reminder with a payslip by HMRC in late June/early July.
• Details of how to pay your Income Tax liability can be found on HM Revenue & Customs website.
• If you pay late, you will be charged interest.
