You can reduce payments on account to HMRC if you expect your profits to be lower in the year to 5th April 2021. Most sole traders will find that their taxable profits will be lower this year due to the effects of the COVID emergency. If you submit an application online before 31st January 2021 you can reduce these payments due on 31st January 2021 and 31st July 2021.
If you need extra time to your tax bill due in January 2021 you can use the HMRC online time-to-pay system.
‘Payments on account’ are advance payments towards your tax bill (including Class 4 National Insurance if you’re self-employed).
You have to make 2 payments on account every year unless:
Each payment is half your previous year’s tax bill. Payments are usually due by midnight on 31st January and 31st July.
If you still have tax to pay after you’ve made your payments on account, you must make a ‘balancing payment’ by midnight on 31st January following the end of the tax year being assessed.
Use this form to apply to reduce your Self Assessment payments on account if:
From your HMRC / Government Gateway online account select Self Assessment:
On the Self Assessment page you will be able to select “Claim to reduce payments on account”
You must claim by 31 January following the end of the tax year.
To complete this form you will need at least one of the following:
You can’t claim online for someone else.
You can track this form in your personal tax account
This is a 10 digit number you received when you registered for Self Assessment, like 1234567890. You can find it on your tax return, statement of account, or any Self Assessment calculations.
You will need to confirm your address. This is the address that HMRC has on file for you. If you moved house recently, check your details in your HMRC online account first.
The following are valid reasons to reduce payments on account:
State the amount you want to reduce each payment on account to. Each reduced payment on account should be half of the net Income Tax and Class 4 NICs you expect to have to pay for the tax year.
To apply by post send form SA303 to your tax office.
You might pay the wrong amount if your tax bill is higher or lower than you expected.
If you overpay, HMRC will send you a refund.
If you underpay, you’ll be charged interest. Any claim to reduce your payment on account must be made in good faith.
Where a taxpayer’s circumstances change significantly from one year to the next, they can make a claim to reduce or cancel the payments on account. The revised payments should reflect the taxpayer’s views on what payment on account, if any, are due for the current year.
Where enquiries show the claim to be excessive HMRC will consider, in appropriate cases, whether penalties may be due. Appropriate cases are those where
The maximum amount of the penalty is the difference between:
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