Personal Tax return and payment on account question

**malvolio** · 8 November 2011, 16:09

Originally posted by css_jay99 View Post

Hi,

just a quick query regarding payment on account and sample figures....

If last year's (i.e. 2009/10) tax return I had to pay around £2500 * 2 payment on account.
If this year's (i.e. 2010/11) tax return my additional tax liability would be about £100, i.e. ( £10100-(2500 *2))

questions:-
1) Will hmrc still demand payment on account ? about how much?
2) what is the max tax liability before payment on account is needed for 2010/11 ? (assuming no POA is needed in (1) )

cheers

css_jay99

It's based on you drawing divdends over the HRT, they assume you will continue to do so at the same rate as the previous year and load the taxes accordingly. You can appeal it down to zero (or any other suitable figure) if you think it right to do so but if you then incur taxes in arrears you will be charged interest

**Craig@Clarity** · 8 November 2011, 16:11

1. Yes. It will be 1/2 of £10,100 by 31 January and the other half by 31 July i.e. 2x£5,050

2. £1,000

Here's a useful link for you HM Revenue & Customs: Understanding your Self Assessment Statement

**css_jay99** · 8 November 2011, 16:55

Damn hmrc, why do they have to get paid before i even earn the money!

my calculation should have been ............ £100, i.e. ( £5100-(2500 *2))

I am still not clear how this is possible... bear with me again pls. I thought that POA only arise when tax due for SA is over £1000

here is what i thought it will be ...

should the calculation not be ?: -
.................................................. .........£
Tax liability for 2010/11........................... 5100
Less POA.............................................(5 000)
.................................................. ......________
Tax due for SA....................................... 100
.................................................. ......________

Will new POA not be £0 since less that £1000?

note that:
£5100 is effecively 10%tax credit on dividend income

what you are saying is that new 2010/11 POA will be based on £5100 and not £100?

thanks

css_jay99

**Craig@Clarity** · 8 November 2011, 17:21

The payment on account is calculated from your personal tax liability not your remaining balance you owe after taking last years POA into the equation, so if in your example the tax liability is £5,100 then they'll want the balance of £100 (£5,100 - £5,000) + £2,550 (£5,100/2) by 31 January 2012 and £2,550 by 31 July 2012.

It is assumed that you'll earn the same level of income in 2011/12 where your personal tax liability ends up being £5,100 again. That's why HMRC ask for POA.

If, however, you know your liability is going to be a lot less in the current tax year, you can apply for a reduction in POA using form SA303 (SA303 - Claim to Reduce Payments on Account). The thing you need to be aware of though is that if you reduce your POA too much and it turns out you owe tax for 2011/12, they'll charge you interest.

Not sure what you mean when you say "£5100 is effecively 10%tax credit on dividend income". Are you saying that this is the 10% of a total gross dividend of £51,000?

**Greg@CapitalCity** · 8 November 2011, 17:24

Hi css_jay99

Unfortunately the POA calculation is based on your tax liability for the year (and not tax left owing).

**css_jay99** · 8 November 2011, 18:16

thanks guys, I now understand.

ignore the tax credit waffle ....... it was a mistake

Looks like no xmas for me this year cos i've spent my POA.

css_jay99

**Scrag Meister** · 9 November 2011, 08:43

I think HMRC base it on your previous year's tax bill and divide by 2.

My 2009/2010 was a very busy year bought a house, got married, honeymooned in Hawaii and therefore I took a lot out of the company.

Come 2010/2011 and they are wanting a lot of tax up front on account, I spoke to my accountant and they spoke to HMRC and explained and the POA was dropped somewhat due to my forecast for the year being a lot lower than the previous year.

HMRC will adjust if you truly expect it to be at a certain level and explain the situation to them.

Personal Tax return and payment on account question