Struggling taxpayers across Cumbria may well be able to mitigate the financial impact of the pandemic by establishing current profitability or filling early tax returns, according to leading accountancy firm Lamont Pridmore.
Self-Assessment taxpayers, whose incomes fell in the 2020-21 tax year, may be able to reduce their next tax payment to HM Revenue & Customs (HMRC) on 31 July 2021, but need to act now by getting the information to their accountant as soon as possible.
A lot of taxpayers had a very different tax year in 2020-21 and may be due a refund or an adjustment to the second payment on account due on 31 July 2021.
Payments on account are determined by estimates based on past income, so providing updated figures from a bad year now could reduce the bill or even lead to a refund.
Graham Lamont, Chief Executive at Lamont Pridmore, said: “Although taxpayers have until January next year to submit their next tax return, many may be able to reduce the amount they have to pay this year by providing HMRC with a clearer idea of their current income by establishing their current profitability or by submitting their return early.”
So far, taxpayers have been getting organised with 950,000 already having completed their 2020-21 tax returns with 63,500 filing their self-assessment on the first day of the tax year, HMRC has revealed.
And with almost 950,000 online Self-Assessment returns received so far this tax year, HMRC is urging others to do the same and file their tax returns early.
‘Payments on account’ are advance payments towards your tax bill (including Class 4 National Insurance if you are self-employed).
You must make two payments on account every year unless:
- your last Self-Assessment tax bill was less than £1,000
- you’ve already paid more than 80 per cent of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings.
Each payment is half your previous year’s tax bill. Payments are usually due by midnight on 31 January and 31 July.
If you still have tax to pay after you have made your payments on account, you must make a ‘balancing payment’ by midnight on 31 January next year.
“Payments on account do not include anything you owe for capital gains or student loans (if you’re self-employed) – you’ll pay those in your ‘balancing payment’,” said Chris Lamont, a Partner at Lamont Pridmore.
“For many, however, the past year has perhaps been the worst ever for them, so mitigating payments will ease the financial pressure.
“Going forward it is likely that many taxpayers will also see a drop in profitability in the 2020-21 tax year.”
Given the difficulties of the last year, Lamont Pridmore recommends that taxpayers consult with an accountant to see whether they can reduce their tax payments in July by postponing their some of their payment on account by establishing their current profitability or by submitting an early tax return.
Chris added: “If you are having trouble paying your upcoming tax bill there may be a number of options open to you.
“Some reduce their payment on account, presuming they will be in better financial shape later and that they will find it easier to settle the remainder of their bill.
“However, others may be able to seek alternative payments arrangements with HMRC via its Time to Pay facilities.”
To find out more about Lamont Pridmore’s accountancy, tax and business services, please visitwww.lamontpridmore.co.uk
