Automatic adjustment by HMRC payments on account, and repayments

More and more clients getting their payments on account for 2022 ( which they have already paid in January and July 2022), adjusted by HMRC automatically, and repayments are being issued. This never used to be the case is this something new? It only servers to make the tax payment system and advising clients unnecessarily further complicated.

Hi,

Payments on account have existed for as long as Self Assessment has existed. There are two criteria, both of which must be met, for payments on account to be created. The first is the underpayment of tax is more than £1000.00. The second is that 80% or more of the underpayment cannot be collected through an automatic source.

Payments on account for the next tax year are based on the underpayment of tax for the previous tax year, as a starting point. Circumstances may change the fortunes of the business etc and the payments on account need to go up or down. Ideally, both payments on account will cover the tax liability for the whole tax year, when the tax return is submitted and the tax due is calculated.  

There is some guidance on payments on account and SALF300 here

Understand your Self Assessment tax bill

SALF303 - Payment of tax: payments on account

Thank you.

Thank you. However the issue here is that HMRC seem to be revising the payments on accounts for January 2022 and July 2022 based on the previous year, ( Say 2021) when the current year return is submitted ( Say 2022). If actual payments made are higher that the liability for 2022, HMRC are making adjustments to the previous payments on account based on the 2021 return, rather than dealing with the overpayment for 2022 as a single adjustment. So when telling clients what to pay for 2022 in January 2023, you now have to wait for HMRC to revised the previously due and paid payments on account which were settled in January and July 2022. This revision which never used to happen until this year is what makes it impossible to accurately tell clients what they need to pay as the goal post is being changed by HMRC in retro respect.

Hi,

The payments on account are always adjusted once a return is submitted.

Thank you.