Any self employed tax experts able to help me? (Photo)

[cedarandfern43]

I'm probably being a dummy, but I just checked my HMRC and when I click tax year ending 5th April 2021 I already owe money in July but I've not even completed my self assessment form for 20-21 yet?

I usually complete my tax return at the start of April and then pay the full amount I owe once it's completed.

(Being self employed really confuses me 😐🥴 clearly I need an accountant haha)

Is it not the payment on account that's calculated on the 19/20 return?

That will be your payment on account - 2 payments each year equal to 1/2 of last years tax bill I think. If you click on the Tax link in the Description column it will tell you.

You probably crossed the threshold where you need to pay on account for the following year too. (Can't remember what that is exactly, but I can remember the shock the first year I had to pay it...)

It says this when I click the amount due?

Yes. As it says it’s a payment on account. Ie you pay in advance towards next years tax bill. You’ll have to pay that in July.

You submit your 2019/20 tax return and part of that is the calculation of your 2020/21 payments on account - basically half of your 2019/20 liability payable in Jan 21 & Jul 21.
You then submit your 2020/21 tax return, deducting the above payments on account you have already paid resulting in a balancing payment/overpayment which you pay in January 2022 (or receive the refund once you have submitted the return) along with the 1st payment on account for 2021/22 based on half of your 2020/21 liability, and repeat...

Is this your first year of having to make payments on account so you haven't had this before, and you just paid the amount your 2019/20 return showed, which would have included the 1st payment on account?
You need to look at the 2019/20 return calculations to check this.

I paid my SA tax just before 31 Jan 2021
Then HMRC stated that I need to pay X amount by 31 July 2021

Same occurred last year

It sounds right to me

So 2 payments, instead of one bigger one

When I click tax year ending 05 April 2020 it comes up with this. The payment I sent to HMRC in 2020 was £4712 which was the amount it said I owed for 19-20z

So have I already paid half of 20-21 tax year in advance and this £1518 due for payment is the second half of 20-21 payment that they have just estimated I will owe?

Sorry I'm so confused, I sound so silly. I've been doing this for 4 years now but to be honest I don't usually look at my HMRC account until April when I submit tax return. I complete my profits and add expenses from receipts, see what I owe and then pay it straight away. I just happened to go look at it today.

So your tax owed for 19/20 was £3100. You paid that plus another £1500 in Jan which was your first payment on account for 20/21

You pay an additional £1500 in July so if next year’s tax bill is £3000 you’ll have paid that already and just have the next payment on account to pay.

They estimate it based on what you earned in the previous tax year.

You are basically always a year ahead. So although you have already paid for this year you will owe them for next year is a simplified way of looking at it.

Have a look on gov.uk for a proper explanation.

@cedarandfern43

(Being self employed really confuses me 😐🥴 clearly I need an accountant haha)

Probably a good idea. Then at least you will know for certain that it is being done properly, you are claiming all you can and also not claiming anything you shouldn't.

That all makes sense then OP.
As Tom Hardy says the figures tally.
It sounds like you've not been in the payment on account regime before, so whatever reason (presumably less tax due).
While I applaud your swiftness in completing your return after the tax year end, you don't have to make the payments till the actual due dates. Just something to bear in mind.
Now you are in the payment on account regime just make sure that you do make the payments on time, including the payments on account, as HMRC charge interest in late payment.

Thank you so much to everybody who helped me understand. I feel like tax is done in such a confusing way 🥴 I'll be on maternity leave for most of the next tax year however will DEFINITELY get an accountant for future years. I'm terrible with this side of business and just do my best 😅

You can ask for your payment on account to be reviewed in that case.

@TomHardyAndMe oh so I'm not charged the advance estimate tax payment for next year (as I'll be on mat leave for most of it?).

Can I just do that via the HMRC website once my mat leave begins? (June)

To reduce your payments on account you can put the details on your 2020/21 tax return, basically because it of self assessment you tell them how much you want to reduce the payments to. If you reduce them by more than the tax outstanding actually ends up being then they charge interest on late payment from the payment on account dates.