31-Jan-23 tax: Can it be reduced?

For those clients that prepare self-assessment personal tax returns, 31 January is usually tax payment day. This tax will primarily be based on your personal income for the tax year ended 5 April 2022, potentially made up of 2 components:

• The balancing payment for 2021/22 (total 2021/22 tax less 31-Jan-22 and 31-Jul-22 payments on account).
• If your 2021/22 tax bill exceeded £1,000, you will also be paying the 1st payment on account for 2022/23 (calculated at 50% of the 2021/22 year tax liability).

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

• Reducing balancing payment:
  • Although your 2022 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 2022 and the date your 2022 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 2023 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 2022/23 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 2022/23 tax liability will be lower than 2021/22 (eg by making a large pension contribution or charitable donation before 5-Apr-23). 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.

Disclaimer - All information in this post was correct at time of writing.