31 July: Can you elect to reduce your tax payment?

9th July 2019

Most individuals who are required to prepare and submit a self-assessment tax return to HM Revenue & Customs in each tax year should now be preparing for their next half-yearly tax payment which is due by July 31.

 

This tax is the second payment-on-account for the 2018/19 tax year. It is automatically calculated as half of the total tax liability for the previous tax year, assuming that was greater than £1,000.

 

For those taxpayers who ‘believe’ their tax will be lower in 2018/19 than 2017/18, perhaps due to lower income levels, higher tax reliefs claimed or more tax collected at source, there is an opportunity to reduce this July tax payment.

If this is relevant to you, this reduction can be achieved by either submitting your 2019 tax return, which shows lower tax due, by July 31, or by completing an SA303 election and submitting this to HMRC. This can be completed in writing or online.

 

If your belief that less tax is due subsequently proves to be incorrect, then the underpaid tax will immediately become payable, together with interest at 3¼%. In addition, HMRC have the power to also raise a penalty if they judge that you have been negligent or fraudulent in making the SA303 election.

 

In certain circumstances, actions can still be taken after the 5 April 2019 tax year end that will result in carry-back claims which can be used to reduce the July tax payment. These include:

 

  • Making charitable donations,
  • Taking relief for next year self-employed trading losses,
  • Crystallising a capital loss on subscriber shares,
  • Making EIS or SEIS investments.

 

As always with tax compliance and planning, if you are in doubt or need assistance, seek professional advice.

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