SALF304 - Payment of Tax: Balancing Payments
A balancing payment (or repayment) is made to reflect tax liability calculated in the self assessment for the year
Section 59B(1)| 3.45 | Apart from cases wholly dealt with through PAYE, it is exceptional if, in any year, the income tax paid at source and/or in payments on account is precisely equal to the actual income tax liability for that year. In most cases an additional payment (or repayment/set-off) of income tax is required once the actual income tax liability has been calculated in the self assessment return. In addition any capital gains tax and/or student loan repayments due are payable as part of the balancing payment. |
| 3.46 | Any additional tax is due
as a final balancing payment (or in the case of overpaid tax, it is
repaid). The amount due or overpaid is the difference between
|
Balancing payment takes tax deduction at source into account
Section 59B(2) & (7)| 3.47 | The calculation of the balancing payment takes into account any tax deducted at source in the tax year to which the tax return relates. The amount taken into account in the calculation of the balancing payment includes any tax to be coded out in a future year, but excludes any amounts deducted at source during the year in respect of previous years. |
| 3.48 | The tax deducted at source includes tax treated as deducted, or treated as paid on any income. |
Due dates for payment
Section 59B(3), (4), (5) & (6) and Schedule 3ZA| 3.49 | The due date for payment depends on the precise way in which the charge arises. In the usual case the due and payable date will be the 31st January next following the year of assessment. |
| 3.50 | But where a notice to file is issued after 31st October following the tax year to which it relates, and there has been no failure to notify chargeability under Section 7, the due and payable date is three months from the date the notice to file was delivered (again, the same as the filing date for such returns). |
| 3.51 | In any case where an amendment or correction of a self assessment has been made (whether made by the HMRC or by the taxpayer), or where an assessment is made by HMRC under Section 29, the due and payable date for additional tax that is not postponed is the later of the normal due dates given above, or 30 days from the date on which the notice of amendment is given. |
Example: Calculation of balancing payments
| 3.52 | Consider a taxpayer whose self assessment shows |
| 3.53 |
| Income tax assessed for 2004-05 | £7,450 | ||
| Capital gains tax assessed for 2004-05 | £5,250 | ||
| Class 4 NICs assessed for 2004-05 | £600. | ||
| Tax deducted at source | £640 |
who has made payments on account as follows
| 31st January 2005 | £3,000 (+ £275 in respect of NICs) | |
| 31st July 2005 | £3,000 (+ £275 in respect of NICs). |
and who has tax deducted at source of £640 for the year.
The balancing payments due on the 31st January 2006 are
| Tax | NICs | |
| Income tax | £7,450 | |
| Capital gains tax | £5,250 | |
| Class 4 NICs | £600 | |
| less | ||
| payments on account | (£6,000) | (£550) |
| less | ||
| tax deducted at source | (£640) | |
| Balancing Payment Required | £6,060 | £50 |
Interest charged on late payment of tax and paid on overpayments of tax
Section 86 and ICTA88/S824| 3.54 | Interest is charged on unpaid balancing payments from the due date until payment. Similarly repayment interest is paid on any balancing overpayments. See paras 3.71 to 3.74A for details of when repayment interest is paid and the period it is paid for. |
| 3.55 | Any overpayment (including repayment interest) may be set off against the following year's payment on account. |
