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Are You Due A Payment On Account Refund From HRMC?

Payment On Account Refund

When you work for yourself in the UK, there are a lot of things to keep track of – from your business expenses to making sure you’re paying the right amount of tax. If you overpay on your taxes, you may be due a payment on account refund. There are various reasons why you may be eligible for a refund so it is important to know when and how to get one.

In this article, we’ll explain everything you need to know about getting a refund, including who is eligible for it, how to claim it, and what to do if you think you might have overpaid.

What is Payment on Account?

Payment on account is a tax payment that self-employed people in the UK can make to cover their estimated taxes for the year. It’s an option that allows them to spread their tax payments out throughout the year, rather than having to pay it all at once.

Payment on account is usually due in January and July, and the amount you owe will be based on your previous year’s income tax and National Insurance contributions (NICs). You can either pay the full amount or make a partial payment – whichever is more convenient for you.

Here is an example of how it works:

Say your total tax bill for the year is £2000. You would then make two payments of £1000 each, in January and July. This would cover your estimated taxes for the year. However, if your actual tax bill turns out to be less than £2000, you would be due a refund for the difference. If your tax bill turns out to be more than £2000, you would have to pay the difference in addition to your two payments on account.

Why Could Your Tax Bill Turn Out to be More/Less?

Your tax bill for the year may turn out to be more or less than your estimated payments on account because your income and expenses can vary from month to month. For example, you may have a lot of business expenses in January but not so many in July, or you might earn more money in some months than others.

There are various industries and jobs where a self-employed might make significantly more money at certain times in the year than others. For example, people who work in the tourism industry may make the majority of their income in the summer when there is more demand for their services. On the other hand, someone who works as a freelance writer may have a few big projects that they complete throughout the year, but their income will be more steady.

Who is Eligible to Pay Tax on Account?

Payment on account is available to self-employed people and limited company owners in the UK. If you’re employed, your employer will automatically take care of your tax payments for you but this isn’t the case for self-employed people or private business owners. Many of these people prefer to pay their taxes in this way because it spreads the cost out over the year and makes it more manageable.

Why Might You be Owed a Refund?

There are a few reasons why you might be owed a payment on account refund. One of the most common is if you’ve overpaid your taxes for the year. This can happen if you miscalculate how much tax you owe or if your income has changed since the last tax year. In the first case, you can claim a refund for the overpaid amount. And in the second case, you may be able to get a tax rebate if you’ve paid too much tax overall.

calculate your taxes

How to Claim Your Refund

If you are due a payment on account refund, there are a few things you need to do in order to claim it. The first step is to determine how much tax you owe/are owed. You can do this by using HMRC’s online calculator. Once you have this figure, you can then claim your refund through your HMRC account.

As long as HMRC accept you are owed money, you should receive it within 12 weeks. If the amount owed is disputed by HMRC, you may need to go through an appeals process during which you can provide evidence to support your case.

How to Calculate How Much Tax You Owe/Are Owed

The first step is to calculate your total income for the tax year. This includes all of your earnings from employment, self-employment, investments, and pensions. Once you have your total income, you can then deduct any allowable expenses. These are costs that are incurred in the course of earning your income and can include things like travel expenses, business equipment, and professional fees.

The next step is to calculate your tax liability. This is the amount of tax you owe on your total income for the year. The amount will depend on what tax bracket you fall into.

Once you have your tax liability, you can then deduct any taxes that have been paid throughout the year. This includes things like PAYE (Pay As You Earn) and National Insurance contributions. The final figure is the amount of tax you owe/are owed for the year.

How You Might Accidentally Overpay

One common way that people accidentally overpay their taxes is by not taking into account all of their allowable expenses. As we mentioned before, these are costs that are incurred in the course of earning your income. HMRC allows these to be deducted because they would normally be provided by an employer.

Another way people accidentally pay the wrong amount is by not including all of their income in their tax returns. This can happen if you have multiple sources of income or if you receive income from overseas. Be sure to include all of your earnings when calculating your total income for the year.

How to Make a Payment on Account

Once you’ve calculated how much tax you owe/are owed, the next step is to pay your tax payment on account. This can be done online, by phone, or through the post.

Paying online is the quickest and easiest way to pay. You can do this through HMRC’s website or using your personal or business online banking. Many people set up a direct debit to pay but if you decide to do this, make sure you have enough money in your account on the due date.

If you choose to pay by phone, you can call HMRC’s Self-Assessment payment line and make a payment using your debit or credit card.

Finally, if you want to pay by cheque, you can send it to HMRC’s postal address for self-assessment payments. Make sure you include your full name and address, as well as the tax year for which the payment is being made.

What You Need to Do if You Underpay

If you underpay your taxes, you will be charged interest on the amount owing. In addition, if the underpayment is more than £3,000, you may also be charged a penalty or face other consequences.

If you think you might have underpaid your taxes, the first step is to contact HMRC as soon as possible. They will be able to tell you how much you owe and arrange a payment plan.

How to Register with HMRC

If you’re self-employed, you need to register with HMRC within three months of starting your business. You can do this online, by phone, or through the post.

To register online, you’ll need to create an account on HMRC’s website. Once you’ve done this, you’ll be able to complete the self-employment registration form.

If you decide to register by phone, you can call HMRC’s Self-Employment Helpline and speak to a customer advisor.

Finally, if you want to register by post, you can download the self-employment registration form from HMRC’s website. You can then send it to their postal address for self-employment registrations.

hmrc for payment on account

How to Register and Do Self-Assessment Tax Forms

Once you’re registered with HMRC, the next step is to complete your self-assessment tax forms. This includes your annual tax return and any other forms that might be required, depending on your specific situation.

These forms may include:

  • Self-Assessment tax return
  • Employment income form
  • Self-employed income form
  • Capital gains tax form
  • Income from property form

You can complete your self-assessment tax forms online, by phone, or by post.

Tips for Keeping Your Financial Records in Order

It’s important to keep your financial records in order so that you can accurately calculate your taxes each year. Here are a few tips:

  • Keep a record of all of your income, including earnings from employment, self-employment, investments, and property.
  • Keep records of your expenses, including receipts, invoices, and bank statements.
  • If you’re self-employed, keep records of your business mileage and travel expenses.
  • If you have employees, keep records of their salaries and any other payments you make to them.
  • Keep a copy of your tax return and any other forms that you submit to HMRC.

In the event that HMRC audits your taxes, you’ll need to be able to provide proof of your income and expenses. If you are not able to do so, you may be subject to penalties.

What Other Taxes are Self-Employed People Eligible to Pay?

As well as income tax, self-employed people are also liable for National Insurance contributions. These are paid as a percentage of your income and help to fund the state pension and other benefits.

Self-employed people may also be liable for Value Added Tax (VAT), which is a tax on goods and services. The rate of VAT depends on the type of good or service, but it’s typically 20%.

There are a number of other taxes that self-employed people may be liable for, including:

  • Capital gains tax
  • Council Tax
  • Inheritance tax
  • Stamp duty land tax

These depend on your personal circumstances and how you earn your money. For example, if you sell property that you own, you’ll be liable for stamp duty land tax.

Tips for Doing Your Taxes

The process of doing your taxes can be daunting, but it doesn’t have to be. Here are a few tips:

  • Start early: Don’t wait until the last minute to start working on your taxes. This will only stress you out and make the process more difficult.
  • Organize your financial records: Organize all of your financial records into separate folders, by type of income or expense. This will make it easier to find what you need when you’re working on your taxes.
  • Use tax preparation software: There are a number of tax preparation software programs available, which can make the process of doing your taxes much easier. It will help you track your income and expenses throughout the year so tax time is simpler.
  • Get help from a professional: If you have any questions about doing your taxes, don’t hesitate to ask a professional. A tax accountant or other tax expert can help you ensure that everything is done correctly.

Pros and Cons of Self-Employment

Self-employment can be a great option for people who want more control over their lives and careers. It can also be a way to make money while working from home.

However, self-employment is not for everyone, and it’s important to weigh the pros and cons before making a decision.

Pros

  • You have complete control over your work schedule.
  • You can work from home.
  • You can choose your own clients and projects.
  • You can earn more money than you would working for someone else.

Cons

  • There is no guarantee of regular income.
  • You are responsible for paying your own taxes and health insurance.
  • You need to be able to manage your own finances and time.
  • You may have difficulty finding work during slow periods.

self-employment

Final Thoughts

If you believe that you are due a payment on account refund, it is important to act quickly. You can contact HMRC to claim your refund, and if they find that you are owed money, they will send you the money within a few weeks. The important thing is that you keep all of your financial and tax records in good order so that if HMRC disputes your claim, you will be able to prove what you are owed.

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