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What are Payments on Account?

Payments on account (PoA) are advance payments towards your expected tax liability for the current year. They’re calculated as half of the previous year’s tax and National Insurance liability (after deducting capital gains tax, tax deducted at source, and other specific items).

When Can You Make a Claim?

You can claim to adjust payments on account if you believe:

• Your expected Self Assessment liability will be less than the calculated payments on account, or
• You’ll have no SA liability or it will be covered by tax deducted at source

Time Limit

Claims must be made by 31 January following the end of the tax year.

How to Make a Claim

Valid Methods

• Online: Using SA Online or form SA303 through Government Gateway
• In writing: Including fax or posted form SA303
• By phone: Only to HMRC Contact Centres

Requirements for a Valid Claim

1. Must be in writing (or through official online channels)
2. Give a clear reason for the reduction/increase
3. State the adjusted amounts or provide sufficient information to calculate them
4. Be signed (if on paper) by taxpayer or authorized agent
5. Received before the deadline (31 January after tax year end)

Acceptable Reasons for Reduction

• Business profits are down/business has ceased
• Other income has decreased
• Tax allowances and reliefs have increased
• More tax deducted at source than previous year
• Expecting to claim carry-back relief

Unacceptable Reasons

• “I am unable to pay” (this is about affordability, not liability)
• No reason given at all

The Process

Step 1: Submit Your Claim

• Complete form SA303 online or on paper
• Provide detailed reasons supporting your belief
• Specify the reduced amounts you believe are due

Step 2: HMRC Processing

Digital Processing (from April 2017)

Most online SA303 forms are processed automatically, creating SA notes with:

• Date received
• Reason code (1-4 corresponding to common reasons)
• New payment amounts

Manual Processing Required For:

• Mismatched personal details (name, address, NINO)
• Cases with special signals (Bankruptcy, Enquiry, Enforcement, etc.)
• Late submissions
• Complex cases

Step 3: HMRC Response

If Valid Claim Accepted:

• You’ll receive acknowledgment letter SA614 (warns about interest if reduction is excessive)
• Payments on account adjusted equally between both installments
• New amounts become due on original dates (31 January and 31 July)

If Invalid Claim:

• You’ll receive letter SA811 explaining why claim was rejected
• Original payment amounts remain unchanged

Important Consequences

Interest Implications

• If you reduce payments too much, you’ll be charged interest on any shortfall from the original due dates
• Interest charges apply even if your claim was made in good faith

Automatic Review

When you submit your actual tax return:

• HMRC compares your claimed reduction with actual liability
• If you over-reduced, interest is charged on the difference
• If actual liability is lower than even your reduced claim, excess payments may be refunded with interest

Penalties

Fraudulent or negligent claims can result in penalties.

Key Rules

Payment Splitting

• Adjustments always split equally between the two payments on account
• You cannot reduce just one payment

Minimum Thresholds

• No payments on account required if previous year’s liability was under £1,000
• OR if more than 80% was deducted at source
• However, if you claim to reduce below £1,000, the reduced amount is still payable

Multiple Claims

• You can revise your claim multiple times before the deadline
• Each revision replaces the previous claim entirely

What Happens Next?

1. Processing Priority: Claims receive priority attention and should be processed same day
2. Payment Allocation: Any overpayments from reduced claims remain on your account for future liabilities unless you request a refund
3. Time to Pay: If you have existing payment arrangements, these will be reviewed after claim processing

Tips for Success

• Be specific about why you expect lower liability
• Provide calculations supporting your estimate
• Consider all income sources when estimating total liability
• Submit early to avoid last-minute issues
• Keep records of your claim and reasoning

Remember: This is about your expected tax liability, not your ability to pay. If you’re having payment difficulties, you should explore Time to Pay arrangements separately.

Here are the key differences between an appeal and a review:

Appeal

What it is:

• Your initial challenge to an HMRC decision or charge
• A statutory right to dispute HMRC’s action
• The first step in the dispute process

Who handles it:

• Decision Maker (Appeals Handler or Review Interest Officer)
• Usually the same office that would normally handle your case
• Officer who made the original decision (in some cases)

Process:

• Must be made within 30 days of Notice of Liability
• Written (though some telephone/online appeals accepted)
• HMRC reviews the facts and makes a decision
• Charge typically stood over during consideration

Review

What it is:

• A second look by HMRC when they disagree with your appeal
• An internal HMRC process with a different officer
• Alternative to going straight to Tax Tribunal

Who handles it:

• Different HMRC officer who wasn’t involved in the original decision
• Often specialist review units (e.g., Appeal Review Unit in Nottingham)
• Independent internal review of the case

When it happens:

• After HMRC refuses your initial appeal
• HMRC offers you a review instead of immediate tribunal referral
• You can request a review if not offered
• You can decline and go straight to tribunal

The Sequence

1. HMRC Decision/Charge
         ↓
2. Your Appeal (within 30 days)
         ↓
3a. HMRC agrees → Appeal allowed
         OR
3b. HMRC disagrees → Review offered
         ↓
4. Review by different HMRC officer
         ↓
5a. Review upholds your position
         OR
5b. Review maintains HMRC position → Tax Tribunal option

Important Notes:

• You don’t have to accept a review – you can go straight to Tax Tribunal
• Review is free and often faster than tribunal
• Different perspective – fresh eyes on your case
• No time limit for HMRC to complete review (though they aim for reasonable timeframes)
• Tribunal remains available if review doesn’t resolve the matter

The review system was introduced to provide an independent internal challenge to HMRC decisions before the formal tribunal process, potentially saving time and costs for both parties.

Here’s how self-assessment appeals are performed:

How to Make an Appeal

Format and timing:

• In writing within 30 days of the Notice of Liability
• HMRC allows 37 days to account for printing and postal delivery (35 days for tax years 2009-10 and earlier)
• Some appeals accepted by telephone or online with proper customer verification
• Appeals via Personal or Business Tax Account are treated as signed appeals

Who can appeal:

• The taxpayer
• Someone acting in capacity
• An authorized agent
• For partnerships: nominated partner only (or their authorized agent)

HMRC’s Internal Appeal Process

Initial handling:

1. Decision Maker receives and considers the appeal
2. Appeals treated as priority post at all stages
3. Appeal recorded on SA system (only by Appeals Handler or Review Interest Officer)
4. Acknowledgment issued using appropriate form (SA525, SA526, SA527)
5. If penalty involved, charge is informally stood over pending determination

Office responsibility:

• Usually handled where received, except:
  • If there’s an open or closed enquiry → goes to enquiry officer
  • If office has no processing capability → forwarded to processing office

Appeal Outcomes

If HMRC agrees with you:

• Appeal allowed
• Charge cancelled/amended
• Appeal closed using MAINTAIN APPEAL function
• Standover reduced to nil
• Confirmation letter sent

If HMRC disagrees:

• Review offered (internal HMRC review by different officer)
• If you reject review → case can go to Tax Tribunal
• You can request tribunal consideration even for late appeals

Special Considerations

Reasonable excuse appeals:

• Must demonstrate circumstances prevented compliance
• Must show you acted without unreasonable delay once excuse ended
• Each case considered on individual facts and circumstances
• Common examples: serious illness, bereavement, fire/flood, HMRC system failures

Partnership appeals:

• Appeal recorded on partnership record only
• Informal standover applied to each partner’s record
• When settled, all partner records must be updated

Documentation required:

• Written appeal stating grounds
• Supporting evidence where possible (especially for reasonable excuse)
• Appeal papers filed and retained throughout process

What happens during the process:

• No automatic stay of collection (except for certain penalty types from 2010-11 onwards)
• Informal standover typically applied to prevent enforcement action
• Open Appeals Work List item created for tracking
• Regular review to ensure prompt handling

The process is designed to be accessible while maintaining proper verification and documentation standards.

Here are the specific aspects of self-assessment you can appeal against:

Charge-based items (items that create a charge on your SA record):

Penalties:

• Fixed penalty for late filing of SA return
• Daily penalty for late filing of SA return
• Tax geared penalty for late filing of SA return
• Tax geared penalty for incorrect SA return
• Tax geared penalty for failure to notify chargeability
• Tax geared penalty for late payment
• Tax geared penalty for excessive reduction of payments on account
• Penalty for failure to produce documents
• Penalty for failure to keep records
• Surcharge (for tax years 2009-10 and earlier)

Assessments and amendments:

• Revenue assessments
• Revenue amendments to SA return
• Jeopardy amendments

Non-charge-based items (no charge created on your record):

• HMRC requirement to produce documents
• Continuation of a Revenue enquiry
• Revenue amendment of a partnership statement

What you CANNOT appeal against:

• Your own self-assessment calculation
• Revenue determinations
• Interest charges
• Balancing payments
• Payments on Account (though you can claim to reduce them)
• Correction notices (but you can reject HMRC’s corrections)
• Revenue calculations

Appeal requirements:

• Must be made within 30 days of the Notice of Liability (37 days allowed for postal delivery)
• Should be in writing (though some appeals accepted by phone or online)
• Can be made by you, someone acting in capacity, or an authorized agent
• For partnerships: must be made by the nominated partner

Grounds for appeal:

For assessments/amendments:

• The assessment or amendment is incorrect
• The actual liability has yet to be determined

For penalties:

• Fact – e.g., return was filed on time, payment was made on time
• Reasonable excuse – e.g., prevented by illness, postal delays, HMRC system issues

The key distinction is that you can appeal HMRC’s actions and decisions, but not your own self-assessment calculations or automatic system calculations.

Based on the HMRC Self Assessment Manual, you cannot appeal against a self-assessment calculation itself. The manual specifically states that taxpayers have “no right of appeal” against:

• Revenue calculations
• Correction notices (though you do have the right to reject HMRC’s corrections)

However, you can appeal against certain related items that might affect your self-assessment calculation:

What you CAN appeal against:

Charge-based items:

• Revenue assessments
• Revenue amendments to your SA return
• Jeopardy amendments
• Various penalties (late filing, late payment, etc.)

Non-charge-based items:

• HMRC requirements to produce documents
• Continuation of an enquiry into your return
• Revenue amendments of partnership statements

Important distinctions:

• Self-assessment calculation = Your own calculation on your return (not appealable)
• Revenue calculation = HMRC’s calculation (not appealable)
• Revenue assessment/amendment = HMRC’s formal challenge to your figures (appealable)

What to do instead:

If you disagree with HMRC’s calculation, you should:

1. Check if it’s actually a Revenue assessment or amendment (which would be appealable)
2. If it’s a correction notice, you can reject the correction
3. Consider whether you need to file an amended return yourself
4. Seek professional tax advice if the matter is complex

Appeals must be made in writing within 30 days of receiving the notice, though HMRC allows 37 days to account for postal delivery time.

The fairness of payments on account in the UK’s HMRC self-assessment system is a nuanced issue with valid arguments on multiple sides.

Arguments for fairness:

The system serves legitimate purposes – it helps HMRC manage cash flow and reduces the administrative burden of collecting large lump sums annually. It also mirrors how employed people pay tax through PAYE throughout the year, creating more consistency across different types of taxpayers. For those with stable, predictable incomes, it spreads the tax burden evenly rather than creating a potentially difficult annual payment.

Arguments against fairness:

The system can create genuine hardship, particularly for those with irregular or declining incomes. Someone whose income drops significantly may still be required to make payments based on their previous year’s higher earnings, creating cash flow problems. This is especially challenging for freelancers, contractors, or small business owners whose income can fluctuate substantially.

The system also assumes income stability that doesn’t reflect modern working patterns. The six-month gap between the July and January payments can be problematic, and the relatively high threshold for reducing payments on account (requiring a significant drop in income) means many people get caught in difficult situations.

The practical reality:

While HMRC does allow reductions to payments on account when income is expected to fall, the process isn’t always straightforward, and many taxpayers either don’t know about this option or find it cumbersome to navigate.

The system works reasonably well for those with stable, growing incomes but can feel punitive for those experiencing income volatility – which describes an increasing portion of the modern workforce. Whether that makes it “unfair” depends partly on whether you view the system’s efficiency benefits as justifying the individual hardships it can create.Retry

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Research

Sonnet 4

You can challenge a late payment penalty through the appeals process. Based on the HMRC guidance, here are the key points about challenging late payment penalties:

Grounds for Appeal

You can appeal a late payment penalty on two main grounds:

1. Fact – For example, where there was already an agreed time to pay (TTP) arrangement in place for that year
2. Reasonable excuse – Where you were prevented by circumstances beyond your control from making the payment on time

What Constitutes Reasonable Excuse

A reasonable excuse is normally something that stopped the customer from meeting a tax obligation on time that they took reasonable care to meet. It might be due to circumstances outside their control or a combination of events.

Examples that might be accepted as reasonable excuse include:

• Serious illness or hospitalization
• Death of a close family member
• Fire, flood, or theft that prevented payment
• Postal delays (with evidence)
• Issues with HMRC online services

What Won’t Usually Be Accepted

• Shortage of funds (unless due to exceptional circumstances outside your control)
• Pressure of work
• Not knowing how much to pay
• Failure by your tax agent
• Lack of reminders from HMRC

Time Limits and Process

An appeal should be in writing and made within 30 days of the issue of the Notice of Liability. However, in practice, to allow for the print and issue of Notices of Liability, 37 days should be allowed from the date the charge is recorded on the taxpayer record.

Important Timing Consideration

A late payment penalty is not imposed until the balancing or final payment for the year is more than 30 days overdue. Therefore, even if there were problems on or around the due date, the customer should have been able to make arrangements to pay before the trigger date for the first late payment penalty.

If you believe you have grounds for appeal, you should submit your appeal in writing to HMRC as soon as possible, explaining your circumstances and providing any supporting evidence.

Payments on account can seem unfair in certain situations, and there are legitimate concerns about how the system works. Here are the main fairness issues and the system’s justifications:

Potential Unfairness

Based on Past Performance

• Calculated using the previous year’s liability, which may not reflect current circumstances
• Doesn’t automatically adjust for business downturns, job loss, or reduced income
• Can create cash flow problems when income has genuinely fallen

Interest Penalties

• If you reduce payments and get it wrong, you’re charged interest from the original due dates
• Creates a “damned if you do, damned if you don’t” situation – pay too much and lose use of your money, pay too little and face interest charges

Cash Flow Impact

• Requires payment before you know your actual liability
• Particularly challenging for businesses with seasonal or volatile income
• Can force borrowing to meet advance payments

The System’s Justifications

Revenue Collection

• Ensures steady government cash flow throughout the year
• Prevents large tax bills becoming unmanageable debt
• Reduces the temptation to spend money that should go to taxes

Spreading the Burden

• Splits tax payments across the year rather than one large sum
• Mirrors how PAYE works for employees (tax deducted throughout the year)
• Makes tax more manageable for most taxpayers

Adjustment Mechanisms

• You can reduce payments if circumstances genuinely change
• Automatic review when you file your return
• Overpayments are refunded with interest

Built-in Protections

Thresholds

• No payments required if previous year’s liability was under £1,000
• No payments required if over 80% was deducted at source

Flexibility

• Can make multiple claims to adjust during the year
• Can revise earlier claims if circumstances change further

The system arguably balances revenue collection needs with taxpayer flexibility, but it does place the burden on taxpayers to actively manage their payments and bear the risk of getting estimates wrong. Whether this is “fair” often depends on your specific circumstances and ability to navigate the adjustment process effectively.

You can reduce your payments on account by making a claim to HMRC if you believe your liability for the current tax year will be lower than the amount calculated from your previous year’s tax bill.

How to Make a Claim

Form SA303: Use this form to request a reduction. You can:

• Complete it online through your Government Gateway account (automatic processing in most cases)
• Download and complete a paper version from Gov.uk
• Submit it by post or fax

Valid Reasons for Reduction

You must provide a valid reason explaining why you believe reduced payments are justified, such as:

• Income has decreased – Your business profits are down or your business has ceased
• Other income has reduced – Investment income, rental income, etc. has fallen
• Increased allowances or reliefs – You’re entitled to higher tax allowances or reliefs
• More tax deducted at source – More of your income will have tax deducted through PAYE than in the previous year
• Expecting to claim reliefs – Such as EIS (Enterprise Investment Scheme) or VCT (Venture Capital Trust) relief

Important Requirements

Your claim must:

• Be made in writing (including online or by fax)
• Include a clear reason for the reduction
• Be submitted before 31 January following the end of the tax year
• State what the adjusted payments should be

What Happens Next

• Automatic processing: Most online claims are processed automatically
• Acknowledgment: HMRC will send letter SA614 warning about interest charges if you reduce payments too much
• Equal split: Any reduction is split equally between both payments on account
• Interest risk: If you reduce too much and underpay, you’ll be charged interest from the original due dates

Important Warnings

• Be realistic: Only reduce if you genuinely expect lower liability
• Interest charges: You’ll pay interest on any shortfall from the original payment dates
• Penalties: Fraudulent or negligent claims can result in penalties
• Consider all income: You must consider your total expected liability from all sources, not just one income stream

The key is to make a reasonable estimate based on genuine changes to your circumstances – don’t just reduce because you can’t afford to pay the full amount, as this isn’t a valid reason under the rules.

Payments on account are advance payments that taxpayers in the UK Self Assessment system make towards their expected income tax and National Insurance contributions for the current tax year, before their final liability is calculated.

How Payments on Account Work

Payments on account are calculated as half of the previous year’s tax and National Insurance liability, after deducting:

• Capital Gains Tax
• Tax already deducted at source
• Underpayments transferred to PAYE
• Student loan and postgraduate loan repayments
• Class 2 National Insurance contributions

When Payments on Account are Due

There are two payments on account each year:

• First payment: 31 January (before the end of the tax year)
• Second payment: 31 July (after the end of the tax year)

When Payments on Account are Not Required

You don’t need to make payments on account if:

• Your previous year’s total tax and National Insurance liability was less than £1,000
• More than 80% of your previous year’s liability was deducted at source (like through PAYE)
• You’re covered by certain other specific circumstances

Making Adjustments

If you believe your payments on account are too high or too low based on your expected income for the current year, you can make a claim to adjust them using form SA303. You must provide a valid reason, such as:

• Your income has decreased
• Your allowances or reliefs have increased
• More tax will be deducted at source than in the previous year

Important Points

• Any odd penny is added to the second payment
• The payments are automatically calculated when your tax return for the previous year is processed
• If your actual liability turns out to be different from your payments on account, any difference is settled through the “balancing payment” when you file your return
• Interest may be charged if you reduce payments on account too much and end up owing money

This system helps spread your tax payments across the year rather than paying everything in one lump sum after filing your return.