Claims to adjust payments on account

Self-Assessment taxpayers are usually required to pay their Income Tax liabilities in three instalments each year. The first two payments are due on:

• 31 January during the tax year e.g., for 2020-21 the first payment on account was due on 31 January 2021.
• 31 July following the tax year e.g., for 2020-21 the second payment on account is due on 31 July 2021.

These payments on account are based on 50% each of the previous year’s net Income Tax liability. In addition, the third (or only) payment of tax will be due on 31 January following the end of the tax year.

There is no requirement to make payments on account where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability has been collected at source.

The payments are based on 50% of your previous year’s net Income Tax liability. If you think that your income for the next tax year will be lower than the previous tax year, you can apply to have your payment on account reduced. This can be done using HMRC’s online service or by completing form SA303.

HMRC’s internal manuals are clear that a reason for requesting a reduction in the payments on account must be given. A request without a reason is not a valid claim.

There are no restrictions on the number of claims to adjust payments on account a taxpayer or agent can make. However, there is a time limit which means that the claim must be received before the 31 January following the tax year in question. There is no requirement to notify HMRC if your taxable profits have increased year on year.