31-Jan-22 tax: Can it be reduced?

11th December 2021

For those clients that prepare self-assessment personal tax returns, 31 January is always tax payment day. This tax will primarily be based on your personal income for the tax year ended 5 April 2021, potentially made up of 2 components:

  • The balancing payment for 2020/21 (total 2020/21 tax less 31-Jan-21 and 31-Jul-21 payments on account).
  • If your 2020/21 tax bill exceeded £1,000, you will also be paying the 1st payment on account for 2021/22 (calculated at 50% of the 2020/21 year tax liability).

So what can potentially be done at this 11th hour to reduce your overall payment:

  • Reducing balancing payment:
    • Although your 2021 tax return will probably already be completed and submitted, it can still be revised. As well as for simple errors, omissions, it can also be revised for:
      •  Gift aid donations to charity between 6 April 2021 and the date your 2021 tax return was submitted, which can be carried back 1 tax year,
      • Taking provisional relief for any expected following year’s self employed business trading loss, on which a 1 year carry back claim will be made on your 2022 tax return,
      • Crystallising a capital loss, by making a negligible value claim, on subscriber shares, and claiming this as an income loss rather than capital loss,
      • Making EIS or SEIS investments during 2021/22 and carrying back the initial income tax relief tax claim 1 tax year.
  • Reducing payment on account:
    • This will automatically reduce if you reduce the aforementioned balancing payment.
    • An SA303 claim to reduce this can easily be made if you believe your 2021/22 tax liability will be lower than 2020/21 (eg by making a large pension contribution or charitable donation before 5-Apr-22). If you over-estimate this reduction, late payment interest will be added by HMRC at a later date.

As with all taxes, if you cannot pay the full amount on time, HMRC should be contacted in advance to see if a ‘time to pay’ arrangement can be put in place.

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