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Posted Fri, 08 Dec 2023 17:33:33 GMT by
Hi, My wife's income is predominantly via PAYE plus some rental profit. During the last FY she moved jobs and upon starting the new role was put on an emergency tax code for 3 months. Checking payslips, when the correct tax code was implemented on month 4 there was an error in collection and a shortfall but since that point and for the remainder of the FY it was correct. Self assessment has highlighted the overall shortfall for the FY. This has meant that less than 80% of total tax liability has been collected via PAYE and she is now being asked to make payments on account. Without the incorrect tax code and collection error, over 80% of tax liability would have been collected in the FY and forecasting next year it will be around 85%. We therefore want to NIL the payments on account in the current self assessment. I've read about being charged interest payments if the tax liability is higher than expected. There will be tax liability next FY, due to the rental income, but over 80% of the total liability will already have been collected so it will just be a balancing payment in Jan. Does the above sound correct? Am I right to assume there will be no penalties or interest with this approach? Thanks in advance.
Posted Fri, 15 Dec 2023 08:12:58 GMT by HMRC Admin 25
Hi GEvans,
You can only reduce the payments on account to nil if there will be no liability for the following tax year.
You would need to estimate the liabilty and if less than the payments on account they can be adjusted accordingly.
If reduced too much then once the tax return is received the payments on account would be amended based on the balance calculated and as the original payment dates apply interest would then be charged. 
Thank you. 

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