HMRC error affects payments on account bills

Due to a HMRC system error some taxpayers may not receive a bill from HMRC for payments on account due by the end of July for the 2018/19 tax year and will be required to pay a higher bill in January 2020.

What are payments on account?

Most people who complete self-assessment pay their taxes in two instalments every six months, called payments on account. These advance payments are based on the individual’s tax liability for the previous year, and are paid in January and July, followed by a final balancing payment the following January.

As an example taxpayers who needed to complete a return for 2017/18 were required to submit their return and pay any tax due for the year by 31 January 2019. Along with the tax for 2017/18 some tax payers were also required to pay payments on account for 2018/19, i.e. the following tax year’s liability. The first payment on account was also due by 31 January 2019 along with a second payment on account due by 31 July 2019.

What is the HMRC error and what does it affect?

Due to a system error at HMRC in January 2019 some taxpayers’ self-assessment statements did not include their first payment on account. Unless those affected taxpayers contacted HMRC at the time, they will not receive a bill for their July payment on account, and will be billed the full amount of tax in January 2020.

A taxpayer can make a voluntary payment which may be a similar amount to the payments on account, but there is a risk that HMRC will consider it as an overpayment and automatically refund it.

Our advice

For any taxpayers who have not received a bill from HMRC it may be tempting to not pay payments on account this July, however those taxpayers should remember to set aside their full tax liability for payment in January 2020, ensuring they have the funds available for January will be important. If the tax is paid late HMRC would look to issue penalties and charge interest on late payment.

PayStream personal tax clients who are required to make payments on account by 31 July 2019 will receive reminders from us and if they follow our advice and make those payments there should not be an issue.