31-Jul: Can your tax be reduced?
5th May 2022
Time is running out for taxpayers to settle any second payment-on-account for the 2021/22 tax year. The payment is due by 31 July, where one is payable.
The amount payable is the second payment-on-account for the 2021/22 tax year and is automatically calculated as half of the total tax liability for the previous tax year, assuming that was greater than £1,000 and less than 80% tax was collected at source from income.
For those taxpayers who ‘believe’ their tax will be lower in 2021/22 than 2020/21, perhaps due to lower income levels, higher tax reliefs claimed or more tax collected at source, there is an opportunity to reduce the July tax payment.
If this is relevant to you this reduction can be achieved by either submitting your 2022 tax return, which shows lower tax due, by 31 July, or by making an election to reduce the payment on account. The election can be made online or via a paper form SA303. If you reduce your payments by too much interest will be charged on any shortfall. Interest will also be charged if payment is not made on time.
The current rate on interest charged is 3.75%.
In certain circumstances, actions can still be taken after the 5 April 2022 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 the following year’s trading loss,
- 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 from your local Whitings LLP contact.
Disclaimer - All information in this post was correct at time of writing.
