SA303: reduce your Self Assessment payments on account

Who needs it

• Anyone making payments on account who expects to owe less tax this year than last.
• People whose business profits or other income has gone down.
• People whose tax relief has gone up, or whose tax deducted at source is more than in the previous tax year.
• Not people who don't make payments on account: none are due if last year's bill was under £1,000 or more than 80% of your tax was paid at source.

What you need before you start

• A realistic estimate of this year's tax bill. HMRC recalculates the payments from the amount you expect to owe.
• Your Self Assessment UTR.
• The name and address of your HMRC office, shown at the top of your statement, if you use the paper form.
• Your reason for the reduction.

How to file SA303

1. 1Estimate this year's tax from up-to-date figures, not a hope that it'll be lower.
2. 2Online: sign in to your HMRC account, select your latest Self Assessment return, then choose "Reduce payments on account".
3. 3If you can't apply online, fill in the SA303 on screen, print it and post it to HMRC. You can't save your progress, so have your figures ready.
4. 4If the year turns out better or worse than expected, the balancing payment on 31 January settles the difference.

When reducing makes sense

Payments on account are two advance payments towards next year's bill, due by 31 January and 31 July, each based on last year's tax. If your income has dropped, they can be more than you'll owe. HMRC lets you apply to reduce them if your business profits or other income goes down, the tax relief you're entitled to goes up, or tax deducted at source is more than in the previous year.

You'll need to tell HMRC the amount you expect to owe, so it can recalculate the payments.

The interest risk

A reduction is a forecast, and HMRC charges interest if it turns out wrong. If your final tax bill is higher than you expected, HMRC charges interest on the difference. Base the claim on current figures, and keep the working.

If you overpay instead, the 31 January balancing payment brings it back to the right amount, and if you've paid more than you owe you may be able to claim a refund.

Common mistakes

• Cutting payments too far. If the final bill is higher, HMRC charges interest on the difference.
• Reducing without a reason HMRC recognises. Lower income, more relief or more tax deducted at source are the grounds it lists.
• Missing the cut-off. The claim must be made by 31 January after the end of the tax year.
• Starting the online SA303 without your figures to hand. It can't save your progress.