31 July: Is full amount of income tax payable?

14th July 2021

Many taxpayers who are required to file a self-assessment tax return to HM Revenue & Customs should now be preparing for their next half-yearly tax payment which is due by 31st July. The amount payable is the second payment-on-account for the 2019/20 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 2019/20 than 2018/19, 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 2020 tax return, which shows lower tax due, by July 31, making an online election to reduce the payment on account, or submitting an SA303 election to HMRC.

 

Due to COVID-19 HMRC have given the option defer payment of the second payment on account to 31 January 2021, if you are finding it difficult to make the payment. There is no need to advise HMRC of a deferment, it is automatic.  HMRC has also confirmed that no interest or penalties will be charged on the deferred payment provided it is paid on or before 31 January 2021.

Do bear in mind that if you decide to defer the July payment this will create a larger amount payable in January 2021.  In view of this if you are able to pay the July payment on time we encourage you to do so.

 

In certain circumstances, actions can still be taken after the 5 April 2020 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.

 

 

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