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Personal Tax – Reduce your second payment on account

Why you might need to reduce your second payment on account

Many people will have deferred their personal tax second payment on account because of COVID and wont now need to make the payment (initially due 31/7/20) to 31/1/21. However, because of reduced income, it may be that the size of this second payment account is no longer appropriate. In this case, you (or we on your behalf) can make an application to HMRC to reduce it.
This note provides a bit of background and explains how to make the application to reduce the payment.

What are payments on account?

Payments on account are basically HMRC’s way of making you pay some of your tax bill in advance. You normally need to make a payment on account if your previous year’s personal tax bill was more than £1,000 (unless more than 80% of your tax was taken off at source, for example through PAYE). So, for the tax year 2019/20 you would normally have paid the first payment on account (50% of your 2018/19 income tax and Class 4 National Insurance) by 31 January 2020 and the second payment on account by 31 July 2020.

How to reduce the second payment on account

Because of Covid, HMRC allowed people to delay paying that second payment on account to 31 January 2021. However, many people’s income will have been reduced because of Covid, so paying the 50% now is unfair. In this case, because your income for the 2019/20 tax year will be lower than the previous tax year (2018/19) you can ask for the level of the second payment on account to be reduced. You do this by filling out form SA303.

A word of warning

Don’t just avoid paying the second payment on account. There are penalties if you do this.

Why you might need to reduce your second payment on account Many people will have deferred their personal tax second payment on account because of COVID and wont now need to make the payment (initially due 31/7/20) to 31/1/21. However, because of reduced income, it may be that the size of this second payment account […]

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