Self-Assessment taxpayers who had a liability of more than £1,000 in the 2020/21 tax year are likely to be required to make ‘Payments on Account’ towards their 2021/22 tax liability. The first interim payment was due on or before 31 January 2022 with the second payment being due on or before 31 July 2022.
If a taxpayer has a reduced income level for the 2021/22 tax year in comparison to 2020/21 a reduction to the July 2022 payment on account could be made ahead of the payment deadline. The easiest way to know whether the 31 July 2022 payment is accurate is to prepare and submit the 2021/22 tax return to HMRC before 31 July 2022. However, in the event this cannot be done, and it later transpires the payments on account paid exceed the actual tax liability due for 2021/22 then a refund can be claimed post submission of the tax return.
On the other hand, if you have reduced your payments on account in the previous year based on estimated income but now know that your income was higher than expected, it is beneficial to submit your tax return as soon as possible to minimise the late payment interest accruing on the over-reduction of the payments.
It is advantageous to submit your 2022 tax return as early as possible as this will provide you with details of the tax that will become due well in advance of the payment and submission deadline of 31 January 2023, allowing you to effectively plan your finances.
If you have not submitted a Self-Assessment tax return previously but are required to submit one for the 2021/22 tax year, please be aware that the deadline for registering for Self-Assessment is 5 October 2022.
If you require any further advice or assistance with Self-Assessment tax returns, please get in touch with Carol Edwards or your usual AAB advisor.