31st July: Can your tax payment be reduced?

15th 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 tax payment which is due by 31 July.

The amount payable is the second payment-on-account for the 2020/21 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 who believe their tax will be lower in 2020/21 than 2019/20, perhaps due to COVID related 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 2021 tax return, which shows lower tax due, by 31 July, making an online election to reduce the payment on account, or submitting an SA303 election to HMRC.

In July 2020 HMRC gave the option defer payment of the second payment on account to 31 January 2021, there is no such deferral this year.

If payment is not made on time then late payment interest will be charged on the late payment. Currently interest is charged at 2.6%.

In certain circumstances, actions can still be taken after the 5 April 2021 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.

 

Blog entry by: Nick Edgley.

Other items in Private Client Tax
Harriet Sim
22nd October 2021 Self Assessment late payment penalties

HMRC are now issuing six month late payment penalty notices, as the due date for 2019/20 tax payments was over seven months ago (includes consideration to the additional months extension as a result of the pandemic). Taxpayers facing financial difficulties due to the impact of COVID-19 may have entered into a time to pay arrangement…

Nick Edgley
21st October 2021 Holiday lettings – declare to HMRC

If you own a UK holiday let are you declaring your rental profits to HMRC? If not time may be running out to make a voluntary disclosure of past profits.   HMRC has the power to request information, or documents, from third parties such as holiday booking sites; as well as being able to search…

Jake Day
20th October 2021 Minimising Your IHT Exposure

As Benjamin Franklin once said; the only two certainties in life are death and taxes. Although it’s a sombre subject, it is important to put in place the right planning so that when we are hit by one, we can avoid the other. We want to ensure we are able to leave as much of…

Sharon Mace
13th October 2021 VAT DIY Scheme: HMRC update list of allowable expenses

There has been some controversy on claims made on DIY building schemes. HMRC have updated their guidance on goods and services that can be claimed under the VAT DIY Housebuilders’ Scheme.   The list is extensive and gives an ABC of items that are allowed, from Agas to woodworm treatment – but there’s a catch,…

Nick Edgley
9th September 2021 The new Health and Social Care Levy – increases to NIC and dividend tax

The new levy will increase all NIC rates by 1.25% from April 2022, this will affect employees, employers, self employed and the NIC paid on P11D benefits (such as company cars and private health care). The increase will apply to employed (include deemed employees) and self-employed individuals and partners earning above the class 1 primary…

Barbara Nicholas
6th September 2021 27th Oct: Budget Day

HM Treasury has announced that Chancellor Rishi Sunak will deliver the Autumn 2021 Budget on Wednesday 27 October.   On 7 September the Chancellor launched Spending Review 2021, which will conclude on 27 October and will be presented alongside the Autumn Budget. The Spending Review will outline government departments’ resource and capital budgets from 2022/23…