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Reduce payments on account HMRC

Can they be reduced if person is not a trading business

 

Someone with a full time job paying PAYE has small rental income, she can afford the tax due but not the payments on account, can she reduce these payments with the reason that she is not a business?

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By mrme89
18th Jan 2018 15:42

No, that is not a valid reason. Neither is reducing them on the basis of affordability.

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18th Jan 2018 15:51

It should only be an issue the first year she has the rental if her income is consistent. After that,the payments on account already made should cover the next year's tax bill, and she will only need to pay payments on account for the next year and so on.

You can only ask to reduce the POA if you tax bill will not be as large next year. If it turns out it is higher than your application they will charge you interest.

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By Mr_awol
to sallyrichardson
18th Jan 2018 17:28

There's not really much excuse in year one TBH.

By the time she makes her first POA she is already 10/12 of the way through the year it relates to. And it's only half of the tax. She's still earning the money before paying the tax.

Contrary to many clients' belief, POAs are not 'up front'. They are simply not as far in arrears

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to Mr_awol
18th Jan 2018 17:32

Mr_awol wrote:
She's still earning the money before paying the tax.

We don't know that, obviously. Things may have taken a downturn.

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By Mr_awol
to lionofludesch
18th Jan 2018 18:53

lionofludesch wrote:

Mr_awol wrote: She's still earning the money before paying the tax.

We don't know that, obviously. Things may have taken a downturn.

It's rental, so it's not difficult to work it out - in which case we do know, obviously ;)

If things have taken a downturn then the client should be aware of it and can reduce the POA. Until Making Tax Disastrous makes that decision for her that is.

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to Mr_awol
19th Jan 2018 07:39

Sure - but we don't have that information.

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By Mr_awol
to lionofludesch
19th Jan 2018 09:35

No, but neither do we have information about a downturn in the first place. You just raised it as a 'what if' to my comment and I have explained why it isn't (or certainly needn't be) relevant.

The client, as I said, damn well should have that information in the case of a small amount of rental income. It's not rocket science.

None of which changes the fact that the client will pay half of their estimated tax liability ten months through the tax year and that as long as they can estimate their profit reasonably accurately (unless they have had a [***] ten months and go on to have a stonking final two months and even then its a push to come up with a genuine scenario) the tax is never actually paid up front.

Even more relevant to the ones that seem to whinge the most - the 30 April year ends who bring their crap in late December of the following year so we cant reduce the POAs for them and who STILL insist that they're paying up front.................

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18th Jan 2018 15:51

Agree - you can't do it on those grounds.

You need to review her likely 2017/18 liability. If any.

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By Matrix
18th Jan 2018 15:56

You could arrange for the estimated rent to be included in her tax code instead.

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to Matrix
18th Jan 2018 16:01

Bit late for 2017/18.

2018/19 maybe.

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By Matrix
to lionofludesch
18th Jan 2018 16:04

Well at least the OP could put it to the client. Although the tax would be paid more quickly since it would all be paid by 5 April if the code is adjusted instead of 50% 31 Jan and 50% 31 July.

OP-surely she should be putting some of the rental income aside to cover this?

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to Matrix
18th Jan 2018 16:56

Not sure if she's going to be all that chuffed with an extra £500+ tax deduction in February and March - even if HMRC agreed AND the tax wasn't subject to the 50% restriction.

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By airgead
18th Jan 2018 16:06

Thanks all for the advice I will let her know, this is the first year the tax is large enough to warrant payments on account and she is paying 40% also no wear and tear allowance for this year.

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to airgead
18th Jan 2018 16:45

airgead wrote:

Thanks all for the advice I will let her know, this is the first year the tax is large enough to warrant payments on account and she is paying 40% also no wear and tear allowance for this year.

And diminishing tax relief on any interest on borrowings from the current year ....

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By NYB
19th Jan 2018 11:36

I over the years have been very naughty reducing payments on account citing "reduced income expected" with tongue in cheek that this maybe the case!. All went well until this year. I filed my SA and ticked the box to reduce payments. A few days later I checked my PA and all was well and the tax shown on my PA OK. Three months later I decided to pay my tax and looked up the amount. It had increased considerably. I phoned up HMRC and after as lot of dilly dallying I got referred up the line to a manager. The answer was that they have picked up that my earnings are not less over the years so I am now caught in the two payment scenario for ever. Hey Ho

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