Does anyone know anything about payments on account for tax

Buckydoesafart · 27/11/2021 18:33

@FabricedeSauveterre

Hoping someone might be able to help!

Self employed until mid 2019-2020 tax year and have been employed since then.
2020-2021 I was fully employed so I notified HMRC that I shouldn’t be paying on account anymore.
Now I have submitted my 20-21 tax return, I have already paid 95% of my tax through PAYE and have a little left to pay from some rental income. HMRC say it was incorrect that I wasn’t paying on account, reinstated payments on account and said i’m overdue and charging interest. I hadn’t budgeted for paying it until end of Jan when I will have a bonus and it’s racking up interest!

I pointed out that the website says if I have paid more to an 80% tax I don’t need to pay on account but the man I spoke to alleges that relates to 19-20 year which is ridiculous when I was self employed then and employed now. Can anyone help!

Hi I had the same issue - I had moved from self employment to employment and had payments on account based on past income. I managed to get these set to zero for the last tax year as I’ve had some gaps in employment but have just submitted my tax return and have been charged interest for these 2 payment on accounts. I spoke to my accountant and the HMRC who have both said the interest is chargeable although we were allowed to set to zero.

They won’t remove the interest unfortunately and it is a bit unfair as it wasn’t clear they would be charging it. I have paid the amount owed this week as I didn’t want to be charged anymore interest.

I’d make sure you have removed payments on account for the current tax year so you’re not in the same position after this tax year.

No advice how to change but sympathies as it’s shit!

Original poster

FabricedeSauveterre · 27/11/2021 19:33

Thanks @Buckydoesafart
I’m so annoyed as I would have put money aside as I was PAYE but I really didn’t realise and now won’t be able to pay off until Jan!
So not only do I have a totally unexpected tax bill I also have to pay interest

OP posts:

Original poster

FabricedeSauveterre · 27/11/2021 19:34

I should say I put aside a small amount for the rent but it’s actually about 5 times the amount I was expecting as I think my tax code was wrong!

OP posts:

Buckydoesafart · 27/11/2021 21:10

Have you checked the figures as sometimes they miscalculate it when you are also PAYE - annoyingly one year I had to pay something like £2k only to get it back the following year and more as my tax code was wrong. I’d just double check the figures!

Original poster

FabricedeSauveterre · 27/11/2021 21:21

I’m not quite sure how to check - it seems to be more than what I was expecting but I will check I inputted it all correctly 😭

OP posts:

Buckydoesafart · 28/11/2021 10:01

I’d do a calculation for the tax on your paye job( there are plenty of online calculators) - based on the normal tax code how much you should have paid (unless you have a company car or other p11d benefits that need to come off the tax free allowance?) compare against your payslips for the tax you have paid and that should give you your underpaid paye tax. then separately calculate what you owe for the BTL. As the BTL tax has increased as you can’t offset the mortgage interest anymore like you used to be able to, the tax on this will have increased a lot over the last few years.

Twostepmodernlife · 28/11/2021 16:38

@Buckydoesafart

I’d do a calculation for the tax on your paye job( there are plenty of online calculators) - based on the normal tax code how much you should have paid (unless you have a company car or other p11d benefits that need to come off the tax free allowance?) compare against your payslips for the tax you have paid and that should give you your underpaid paye tax. then separately calculate what you owe for the BTL. As the BTL tax has increased as you can’t offset the mortgage interest anymore like you used to be able to, the tax on this will have increased a lot over the last few years.

Thanks Bucky, I have kept a detailed spreadsheet and thought I’d done exactly the calculation you describe but still a couple of grand out. Re BTL, I know, i stopped renting it one month into the tax year so it’s literally only one month’s income. Argh. Can’t work out if it’s worth paying an accountant, it’s not if I’m only likely to get off the interest.