HMRC Deletes Payment on Account Records in Error

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August 18th 2019
Tax Week 20
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HMRC Deletes Payment on Account Records in Error

Payments on Account are made to balance tax payments in advance of each tax year, but HMRC did not make demands from some taxpayers this January.

People declaring their income using the self assessment system find that the amount to be paid to HMRC at submission time is different to the actual tax bill from their tax calculation. The reason for this is the payment on account system.

Payments are not due for up to nine months after the end of a fiscal tax year for a self assessment taxpayer. HMRC normally demand up to 50 percent of the taxpayer's calculated tax upfront with their tax bill payment (in January). This goes toward the calculated tax for the following tax year with an additional 50 percent taken in July. The two are combined the following January and any shortfall is added to that bill as a balancing payment or deducted from the next bill.

It's a complex calculation as it's not really 50 percent and certain amounts are not collected in the payment on account. For this reason we created a specific calculator to estimate payments on account. You just need to enter up to your previous three years income and each tax year is calculated and each bill is calculated based on how payments on account are calculated.

So, normally a straightforward process, however HMRC have had a computer problem this January leading to many taxpayers not having the 50 percent payment added to their tax demand. This means they could end up having to pay two sets of payments on account this July (2019).

Two sets of payment on account are essentially the entire tax bill for the income generated between 6th April 2018 and 5th April 2019.

Some people are omitted from making payments on account. People who had a tax bill less than £3,000, are employed under PAYE and submitted either a paper return or online return before 30th December can pay tax through a tax code. Others omitted are people who have a tax bill less than £1,000 alongside other conditions.

HMRC has as yet not informed taxpayers who are affected on what to do, but issued a statement saying that they will not charge interest on the missing payment.

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