It may be possible if your income for 2021-22 was lower than the previous year.
Why would a reduction be possible?
The self-assessment tax payment you are due to make 31 July 2022 (the second payment on account for 2021-22) is presently based on the profits/income you earned during 2020-21. If your actual earnings for 2021-22 are estimated to be lower than for 2020-21, you can elect to reduce payments on account payable January and July 2022.
Let’s complete your tax return sooner this year
The most effective way to rebase your 2021-22 tax payments based on actual data is to complete and file the 2021-22 tax return before 31 July. In this way we can apply – as part of the tax return submission process – to reduce payments on account due 31 July 2022.
But what if you can’t file your tax return before 31 July 2022?
If you can produce a realistic estimate of your income for 2021-22, we can lodge a formal request to HMRC to reduce your tax payments for 2021-22 without actually filing your tax return. The downside of this process is that if your subsequent tax return shows higher income levels than the estimate, then interest charges may be applied by HMRC.
What about the first payment on account for 2021-22 made 31 January 2022?
If your taxable income for 2021-22 is lower than that for 2020-21, then any payment on account you may have made in January 2022 may have been too much. By rebasing your income on actual earnings for 2021-22, and if applicable, applying for both payments on account due January and July 2022 to be reduced, any overpayment made in January will automatically be included in the recalculated payment due 31 July. In some cases, this may result in a tax refund.
What to do next
If you have suffered a reduction in income – for 2021-22 compared to 2020-21 – call us now so we can get organized. There is no point in paying over hard-won cash reserves to HMRC if it is unnecessary.