31 Jan: Could Your Self-Assessment Tax Be Reduced?

Could your Self-Assessment Tax 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 2023, potentially made up of 2 components:

• The balancing payment for 2022/23 (total 2022/23 tax less 31-Jan-23 and 31-Jul-23 payments on account).
• If your 2022/23 tax bill exceeded £1,000, you will also be paying the 1st payment on account for 2023/24 (calculated at 50% of the 2022/23 year tax liability).

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

• Reducing balancing payment, to reflect:
  • If your 2023 tax return has not yet been submitted:
    •  Gift aid donations to charity between 6 April 2023 and the date your 2023 tax return will be submitted, which can be carried back 1 tax year,

• • Irrespective of whether or not your 2023 tax return has already been submitted:
    • 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 2023/24 and carrying back the initial income tax relief tax claim 1 tax year.

• Reducing payment on account (not due at all if prior year tax liability is less than £1,000, or more than 80% collected through PAYE), to reflect:
  • 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 2023/24 tax liability will be lower than 2022/23 (eg due to lower income in 23-24 than 22-23 or due to making a larger pension contribution or charitable donation in 23-24). If you over-estimate this reduction, late payment interest will be added by HMRC at a later date.
  • Where you are a partner in a family partnership, it may be possible to reduce your relative profit share, so that your total 22-23 tax falls below £1,000, so no 23-24 payments on account are due.

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