Tax refund question...
Discussion
Hi all, I am in the unusual situation whereby my accountant has just informed me that I'm actually due a tax refund from the 08/09 tax year. Having been shafted by payments on account in that year, this is obviously good news, although it does beg the question why make me pay more tax on money I hadn't earned yet when they're just going to give it back!
Anyway, question is: when can I expect a cheque from HMRC? I'm guessing not any time soon so they can hold onto their "interest free loan" for as long as possible (I'm guessing they won't pay me interest on the cash that I have been out of pocket for).....
TIA
Anyway, question is: when can I expect a cheque from HMRC? I'm guessing not any time soon so they can hold onto their "interest free loan" for as long as possible (I'm guessing they won't pay me interest on the cash that I have been out of pocket for).....
TIA
If you think or know that the Payments on Account you are going to make are too high, you are fully entitled to reduce those Payments on Account to a more realistic level. You can reduce the payments all the way down to Nil if that is appropriate.
The Payments on Account are initially set by looking at the Self Assessment tax liability for the previous year - the underlying assumption being that the liability for the next year will be of a similar magnitude. This, of course, is not always the case. If the income that gave rise to the Self Assessment tax liability for the previous tax year has subsequently reduced or ceased, then you can go ahead and make the claim to Reduce the Payments on Account. There is a specific form for this entitled the SA303. The claim can also be made on the face of the Self Assessment tax return.
The main problem with reducing Payments on Account is that it isn't always easy top predict what your next year's liability is going to be. If you over reduce the Payments on Account, HMRC will charge you interest on the gap between what you did pay and what you should have paid.
On the assumption that your Self Assessment return is being submitted on line, then the refund should be processed quite quickly.
The Payments on Account are initially set by looking at the Self Assessment tax liability for the previous year - the underlying assumption being that the liability for the next year will be of a similar magnitude. This, of course, is not always the case. If the income that gave rise to the Self Assessment tax liability for the previous tax year has subsequently reduced or ceased, then you can go ahead and make the claim to Reduce the Payments on Account. There is a specific form for this entitled the SA303. The claim can also be made on the face of the Self Assessment tax return.
The main problem with reducing Payments on Account is that it isn't always easy top predict what your next year's liability is going to be. If you over reduce the Payments on Account, HMRC will charge you interest on the gap between what you did pay and what you should have paid.
On the assumption that your Self Assessment return is being submitted on line, then the refund should be processed quite quickly.
Edited by Eric Mc on Friday 15th January 09:43
Im self employed, and after waiting a few months for my refund I gave them a call. They asked me if I would like the refund!! yes please! oh ok in that case would you like a cheque? yes please! No problem sir it will be issued within 10 days. I got it in the mail 4 or 5 days later.
Give them a ring, they're helpful enough usually
Give them a ring, they're helpful enough usually
matsmith said:
Im self employed, and after waiting a few months for my refund I gave them a call. They asked me if I would like the refund!! yes please! oh ok in that case would you like a cheque? yes please! No problem sir it will be issued within 10 days. I got it in the mail 4 or 5 days later.
Give them a ring, they're helpful enough usually
The default aaumption by HMRC is that you will NOT want a refund. If you want the overpaid tax to be refunded, you must tick the appropriate box on the Self Assessment tax return.Give them a ring, they're helpful enough usually
If you don't, the excess amount paid will be held as a credit on your tax account for offset against future tax liabilities.
It works wonders for Alistair Darling's cash flow.
matsmith said:
Im self employed, and after waiting a few months for my refund I gave them a call. They asked me if I would like the refund!! yes please! oh ok in that case would you like a cheque? yes please! No problem sir it will be issued within 10 days. I got it in the mail 4 or 5 days later.
Give them a ring, they're helpful enough usually
I'll wait til after the 31st Jan, then call Give them a ring, they're helpful enough usually
Eric Mc said:
matsmith said:
Im self employed, and after waiting a few months for my refund I gave them a call. They asked me if I would like the refund!! yes please! oh ok in that case would you like a cheque? yes please! No problem sir it will be issued within 10 days. I got it in the mail 4 or 5 days later.
Give them a ring, they're helpful enough usually
The default aaumption by HMRC is that you will NOT want a refund. If you want the overpaid tax to be refunded, you must tick the appropriate box on the Self Assessment tax return.Give them a ring, they're helpful enough usually
If you don't, the excess amount paid will be held as a credit on your tax account for offset against future tax liabilities.
It works wonders for Alistair Darling's cash flow.
Tbh, I maybe I'm missing something, but I've never got payment on account. If myself/my company is paying tax and NI every quarter wrt to my salary, why should more have to be paid in advance on money I haven't earned yet?
If you have tax or additional additional tax to pay under the Self Assessment system, then you will be expected to make Payments on Account for the following year's tax. As I have mentioned elsewhere, if you KNOW that the following year's Self Assessment tax bill is going to be lower or non-existent - because all your tax will be covered by PAYE or other methods of deduction at source for example, then you are perfectly allowed to claim to reduce the Payments on Account to the level you think is more appropriate.
And are the Payments on Account really paid before you nhave earned the relevant income?
Think of when they are payable. The 2009/10 Payments on Account are payable on 31 January 2010 and 31 July 2010. The tax year 2009/10 ends on 5 April 2010. Therefore, the only bit of the Payment on Account that MIGHT be in advance of the money being earned is the January 2010 payment - and even then the January payment is being made only 64 days before the end of the tax year - so you've had 301 days of "earning" going on before that date.
The second Payment on Account is made on 31 July, almost four months AFTER the end of the tax year to which it relates.
If you feel you are paying the correct tax quarterly or monthly through the PAYE system, why have you got any Self Assessment tax liabilities in teh first place?
And are the Payments on Account really paid before you nhave earned the relevant income?
Think of when they are payable. The 2009/10 Payments on Account are payable on 31 January 2010 and 31 July 2010. The tax year 2009/10 ends on 5 April 2010. Therefore, the only bit of the Payment on Account that MIGHT be in advance of the money being earned is the January 2010 payment - and even then the January payment is being made only 64 days before the end of the tax year - so you've had 301 days of "earning" going on before that date.
The second Payment on Account is made on 31 July, almost four months AFTER the end of the tax year to which it relates.
If you feel you are paying the correct tax quarterly or monthly through the PAYE system, why have you got any Self Assessment tax liabilities in teh first place?
Edited by Eric Mc on Friday 15th January 19:51
Eric Mc said:
If you have tax or additional additional tax to pay under the Self Assessment system, then you will be expected to make Payments on Account for the following year's tax. As I have mentioned elsewhere, if you KNOW that the following year's Self Assessment tax bill is going to be lower or non-existent - because all your tax will be covered by PAYE or other methods of deduction at source for example, then you are perfectly allowed to claim to reduce the Payments on Account to the level you think is more appropriate.
And are the Payments on Account really paid before you nhave earned the relevant income?
Think of when they are payable. The 2009/10 Payments on Account are payable on 31 January 2010 and 31 July 2010. The tax year 2009/10 ends on 5 April 2010. Therefore, the only bit of the Payment on Account that MIGHT be in advance of the money being earned is the January 2010 payment - and even then the January payment is being made only 64 days before the end of the tax year - so you've had 301 days of "earning" going on before that date.
The second Payment on Account is made on 31 July, almost four months AFTER the end of the tax year to which it relates.
If you feel you are paying the correct tax quarterly or monthly through the PAYE system, why have you got any Self Assessment tax liabilities in teh first place?
It would seem that I have missed something then. All I know is that from Oct 07 to Feb 08 I did some contracting work that was v lucrative compared to the previous full time job I had had as am employee. In March or so of 08, I started my own company and my salary dropped back to its old level roughly. I then went back to full time work from Oct 08 to July 09, then back to self employed a few months ago. If memory serves I had to make non-trivial payments on account in Jan and July of 08, and also in 09....and I have in the last few weeks found out I am now due a significant refund from HMRC on top of my accountantc telling me I have over paid tax such that the rest of my salary plus more for the year can be drawn without having to pay tax at all. It just seems a rather odd situation!And are the Payments on Account really paid before you nhave earned the relevant income?
Think of when they are payable. The 2009/10 Payments on Account are payable on 31 January 2010 and 31 July 2010. The tax year 2009/10 ends on 5 April 2010. Therefore, the only bit of the Payment on Account that MIGHT be in advance of the money being earned is the January 2010 payment - and even then the January payment is being made only 64 days before the end of the tax year - so you've had 301 days of "earning" going on before that date.
The second Payment on Account is made on 31 July, almost four months AFTER the end of the tax year to which it relates.
If you feel you are paying the correct tax quarterly or monthly through the PAYE system, why have you got any Self Assessment tax liabilities in teh first place?
Edited by Eric Mc on Friday 15th January 19:51
It sounds like you had some genuine Self Employment (i.e. Sole Trader) income in tax year 2007/08.
This would have meant that you needed to pay a Self Assessment tax liability for 2007/08 on 31 January 2009.
You would also have been required to make two Payments on Account for tax year 2008/09, the first on 31 January 2009 and the second on 31 July 2009. Those Payments on Account would have been based on the full 2007/08 Self Assessment liability.
This would hav been on the assumption that your Self Assessment tax liability for 2008/09 was going to be roughly the same as that for 2007/08. HOWEVER, as it has turned out that your ACTUAL 2008/09 Self SAssessment tax liability is lower than it was for 2007/08, this means that the two 2008/09 Payments on Account you already made have turned out to be excessive, and you are due a refund.
You do have the option under the Payments on Account system to have the payments reduced to a more realistic level. If you KNOW that your Self Assessment tax liability for the following year is going to be less than the previous year, you are allowed to make a claim to have the two Payments on Account reduced to a more relaistic level. Perhaps you could have exercised that option which would have prevented the excessive payments back in January and July 2009.
This would have meant that you needed to pay a Self Assessment tax liability for 2007/08 on 31 January 2009.
You would also have been required to make two Payments on Account for tax year 2008/09, the first on 31 January 2009 and the second on 31 July 2009. Those Payments on Account would have been based on the full 2007/08 Self Assessment liability.
This would hav been on the assumption that your Self Assessment tax liability for 2008/09 was going to be roughly the same as that for 2007/08. HOWEVER, as it has turned out that your ACTUAL 2008/09 Self SAssessment tax liability is lower than it was for 2007/08, this means that the two 2008/09 Payments on Account you already made have turned out to be excessive, and you are due a refund.
You do have the option under the Payments on Account system to have the payments reduced to a more realistic level. If you KNOW that your Self Assessment tax liability for the following year is going to be less than the previous year, you are allowed to make a claim to have the two Payments on Account reduced to a more relaistic level. Perhaps you could have exercised that option which would have prevented the excessive payments back in January and July 2009.
Don't forget however, that you can have Self Assessment tax liabilities for other reasons than just being Self Employed.
For instance, as you are now a director of your own limited company, you can (and do) pay yourself with dividends. If your total income for the tax year (from all sources) is not high enough to put you into the higher rate tax btracket, you pay ABSOLUTELY NO TAX on the dividend amounts.
If your overall income for the year puts you over the threshold for paying higher rate tax, you will pay higher rate tax on that part of the dividends that goes over the threshold.
That extra tax is collected through the Self Assessment tax system and can involve you in having to make Payments on Account.
For instance, as you are now a director of your own limited company, you can (and do) pay yourself with dividends. If your total income for the tax year (from all sources) is not high enough to put you into the higher rate tax btracket, you pay ABSOLUTELY NO TAX on the dividend amounts.
If your overall income for the year puts you over the threshold for paying higher rate tax, you will pay higher rate tax on that part of the dividends that goes over the threshold.
That extra tax is collected through the Self Assessment tax system and can involve you in having to make Payments on Account.
Eric Mc said:
For instance, as you are now a director of your own limited company, you can (and do) pay yourself with dividends. If your total income for the tax year (from all sources) is not high enough to put you into the higher rate tax btracket, you pay ABSOLUTELY NO TAX on the dividend amounts.
Trust me, that was the first thing I noticed 
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