A chance to reduce your tax bill?

If you’re a sole trader, then your second payments on account deadline is on the horizon – 31 July this year – when you are expected to pay half of your estimated tax for the 2022/2023 tax bill. This figure, which appears on your most recent tax statement (which you can access online) is based on the profit you reported in your 2021/2022 tax return.

If you are worried about the looming bill – which is understandable in today’s economic climate – there is a way to potentially reduce it. When calculating your Payments on Account (POA) – which are payments made towards your following year’s tax and NI contributions – your tax bill for 2021/2022 will have been divided in half.

If you have been organised enough to have already submitted your accounts for 2022/2023 and you know that you had less self-employed income during that period than in the previous 12 months, it is possible to approach HMRC and ask them to reduce your payments on account. If you strongly suspect that you didn’t make as much profit that year – perhaps you simply weren’t working as much – then it’s worth getting those accounts sorted out now.

You do need to be sure of your numbers though, so getting your accounts up-to-date and submitting them to us in good time, is the best way to do this. If you simply approach HMRC without being sure of the numbers and have reduced them too much, you could face interest charges and even a penalty.

If you file your accounts online, there is a section ‘reduce my payments on account’.

It’s important to note that you do need to tell HMRC that you’d like to reduce your payments on account – don’t just send them less money by 31 July or assume that they have checked what you’ve already submitted post-April this year. If you don’t get in touch, it will simply show up that there is an amount outstanding and you’ll be charged interest.

If you’ve got any questions at all, then please do contact us on 01892 513515 or info@lewisandco.biz