HMRC payments on account - can anyone advise?

[TheGenealogist]

Just looking at my tax return for 20/21. I am self employed as a sole trader and work very part time alongside studying. I generally pay Class 2 and Class 4 NICS and some income tax, due the January after the end of the tax year.

Last year, I had a bumper year, was able to take on more work because other activities were curtailed because of Covid, and earned more than I've earned in the past. My current tax liability for 20/21, all in with the national insurance and income tax is around £2k. No issue with that.

However, HMRC are also asking for a payment of £1k on account for next year on 31st Jan, and another £1k on account on 31st July 2022. My tax year runs 1 April - 31 March and going on my first 4 months there is NO WAY I am going to earn as much as I did last year, and I'm not trying to either.

So. If I make the first payment on account of £1k in January, can I get my self assessment for 21/22 in very speedily in May/June and avoid making the second payment on account which they will just have to pay back to me anyway? The £1k due in January will probably be more than my liability for the whole of 21/22.

(And yes I know I can webchat and call with HMRC but they are SO busy).

You can request to reduce it online - automatically happens however you may be charged interest if your earnings are inline with the HMRC forecast. For tax amounts that you are referencing I wouldn't worry about that however.

Hmm. It's more what if I just go with their estimate, make the first payment, then get a return in for this current year before the second payment is even due.

I have given up trying to understand how they work it out. I know it's supposed to help us little people keep up but I always feel like they are stealing whatever interest rates I could have got for it.

And yes, I know that's daft!

Yes you can do that pay the £1k and then submit the return as soon as possible at the end of the tax year. I’ve done that in the past as well as the other route of asking for a reduction of the payment on account.

To answer you question, yes, you can submit your tax return in (eg) May 22 and get the repayment if the Jan payment on account is more than your total 21/22 bill. And then no, you don't then need to make the second payment on account - they will update the system to show it isn't due.

My income fell considerably during 20/21 but I made my first payment on account for 20/21 as requested in Jan 21 based on the previous, much higher year, and then put my tax return in in May 21. This left me with a very small balance to pay which was due by end July 21. So my tax account is showing as clear for 20/21 and I haven’t had to make the second payment in advance.