Balancing payment -self assessment mistake

[Lovemybunnies]

I was self employed for two years. For the first year I had an accountant prepare my return but for the second year I decided to do it myself as i thought it was quite straightforward. Unfortunately the accountant had used capital allowances to claim for a few bits of equipment I needed ( desk, computer equipment etc) and as I didn’t know how to deal with this I didn’t claim for it in the second year. As a result I have ended up with a balancing payment for the first year of £600. This is due at the end of January and I don’t know if it’s worth getting an accountant to correct my return. Can someone advise me please?

Is it a capital allowances balancing payment (which would suggest you have put a disposal figure in) or just the Jan balance due after deducting the 2 payments on account from the total liability for the year?

You can amend and resubmit a tax return within 12 months of submission. If you’re still within that window then yes, get an accountant to help correct it

When I had an accountant do my return a decade ago it was £400, will you really find one for much less than £600, particularly this close to deadline?

@Chasingsquirrels i paid the full sum due for the first year and the balancing payment only appeared after I submitted the return for the following year. The capital allowances are the only thing I can think of. HMRC are clawing back as it looks like I have disposed of the equipment . @ACynicalDad you are probably right which is why I am wondering if it is worth it! It’s just frustrating.

[Is it a capital allowances balancing payment (which would suggest you have put a disposal figure in...
...Sorry, I meant balancing charge not balancing payment in my previous post, quoted here.]

From what you have said, and it is hard to see without looking at the figures, it sounds like the following has happened.

Yr 1. You made x profit and also had some capital expenditure. The accountant claimed capital allowances (probably full expensing or 100%) on the capital expenditure so that the taxable profit was slightly lower than the x figure.

You paid the Yr 1 tax up front on 31 Jan based on x profit.
Let's say your accounts are to end March.
So Yr 1 = y/e Mar 2023. Tax paid 31 Jan 2024.
You also paid on account for Yr 2 (y/e Mar 2024) in 2 installments, 31 Jan 2024 and 31 Jul 2024.

Yr 2. You made a profit (presumably a different amount to Yr 1) and have tax to pay.
You have made 2 payments on account towards this, but the amount will be different because the profit is different.
The difference is the balancing payment now due, i.e. £600 is the difference in tax between the 2 years due to different taxable profits (and different tax rates where applicable).

The balancing payment WOULD only appear after you submit the Yr 2 return, as until that point HMRC don't know what the Yr 2 tax is.

Unless you put disposal proceeds into your figures (and I'd be extremely surprised if this is the case as you said you'd ignored the capital side), or the accountant only claimed a proportion of the capital costs (unlikely, but you should be able to tell from looking at rhe full computation for Yr 1) then the capital expenditure side is just a red herring, in that it forms part of the taxable profit calculation in Yr 1 but hasn't reoccurred in Yr 2.

I assume the capital allowance was a one off tax deduction for equipment you needed for your business, so you don't have that on this years assessment, hence if you earned the same you would pay more tax this year, they estimated the tax lower than you actually should have paid so you have a balancing payment. Have you looked at your tax calculation to see why the tax is different to what you expected?

Yes I had similar with a self assessment in the past. Because I owed over a certain threshold they also took payment for the following year in instalments in January and July based on what they predicted my profit to be based on the previous year's figures. If you submit your full figures before July they will recalculate your July instalment so you are paying the correct amount overall for that year. But if you wait until the January deadline to submit your final figures then you will either have to pay a balancing payment or get a refund once they calculate the actual amount due.

If the tax is less you can reduce the Jul payment, but if it is more you don't increase it - you still pay the balance the following Jan.

Have you actually purchased equipment in your second year for which capital allowances would apply? Most deductions are for your first year anyway

@Chasingsquirrels sorry my mistake, I think mine must have been less so my instalment was reduced so I just assumed it worked the other way too.

Always good to get your return in early regardless!
If the tax is lower you, as you say, have a lower 2nd payment on account.
If it is higher then you have more time to ensure you can make the payment.

What may be worth looking at is if it can be corrected next year with an accountant doing the whole thing??

Thanks so much everyone. I’m so grateful for the replies. I think @Chasingsquirrels is probably right and I am going to pay it without trying to adjust my return.