Claiming to reduce payments on account once registered for MTD for Income Tax
Under MTD for Income Tax, a claim to reduce payments on account isn’t made through the quarterly updates or the final declaration in compatible software. HMRC has not provided an API for it, so it sits outside the software submission journey.
Instead, taxpayers or agents can make the claim through HMRC’s online services, where an option can be found to adjust payments on account.
Before making a claim
The option only appears once payments on account have been set for the year, which usually happens after the previous year’s return has been processed. Agents need a current authorisation for the client’s MTD Income Tax before they can see or change these details.
How to make a claim
Agent (agent services account)
- Sign in to the agent services account.
- Select the option to manage a client’s Income Tax details, 'Manage your client’s Income Tax details' in the MTD section.
- Enter the client’s National Insurance number and confirm it’s the right client.
- Go to the client’s payments on account and select the option to adjust them.
- Enter the new reduced amount and select the reason.
- Check the details and confirm.
Taxpayer (personal tax account)
- Sign in to HMRC online services with their Government Gateway details.
- Go to the Income Tax section for Making Tax Digital, 'View and change your Income Tax'.
- Select the option relating to payments on account, usually shown as 'Adjust payments on account'.
- Enter the new reduced amount.
- Select the reason for the reduction, for example profits being lower than the previous year or more tax being deducted at source.
- Check the details and confirm. The revised amounts should then show in the account and on the payment schedule.
Note: If the final liability ends up higher than the reduced payments on account, interest is charged on the shortfall from the original due dates, and penalties can apply if the reduction wasn’t reasonable.
