You are right, payments on account are for the self employed. HMRC basically look at someone's tax liability that is calculated probably at 5th April in one year but not payable until 31st January the following year and so make an assumption that the current tax liability is likely to be similar to the previous year and ask for 50% 'on account' on 31st Jan and the next 50% by 31st July. When the actual tax liability is calculated for the following year, the two POA's are deducted meaning the self employed person either needs to pay a balancing charge (Difference between the tax due and the payments made), claims a refund (if payments made were too much) or nothing if the tax is strangely the same as previous year. The tax payer then carries on paying POA's at 50% every 6 months.
Obviously under PAYE you are taxed as you go along, so no need have payments on account. If you are still being asked for a POA for this year you can submit form SA303 to reduce it and also you should inform HMRC that you are no longer self employed (you can stop paying your class 2 NICs too). Are you still on NT tax code now we are into 2014/15? NT means that no tax will be deducted at source, I'm not sure why that would be, sometimes it is the case if you are being taxed from another country under double taxation treaty rules but doubt that's the case with you?
Thank you for the reply. I have to say that I have unintentionally misled you. I am really sorry, I am not that good with paperwork.
Looking at my paperwork I was not self-employed but PAYE with tax not being deducted due to code NT as I was entitled to Sea Farers Allowance working in part of the Congo. My Employer is based in Guernsey.
For 2012/2013 my code was NT, and a SA return prepared by my Accountant who calculated days abroad etc.
I have been advised I can no longer claim Sea farer earnings deduction under new tax rules.
I did receive a foreign tax certificate but for a fairly small amount, certainly not enough to cover UK Tax.
For 2012/2013 my code was NT and also for 2013/2014 and 2014/2015.
So for 2013/2014 I owe HMRC the full year's tax ( without seafarers deduction) which I have made provision for.
However when I enter the figures it shows the tax correctly due, and a 1st payment on account in January and a 2nd payment on account in July.
There is still some information I would prefer to have to give you a more certain response but I think payments on Account could be correct, even for PAYE.
For earlier years your employer operated Code NT as HMRC were satisfied that little or no liability would be due to the seafarers deduction if you fulfilled the criteria of being abroad for the required days.
Changes introduced by HMRC meant that you were no longer entitled to this allowance, although I suspect your salary would have been increased for 2013/2014 to cover your tax bill. So you now have a tax bill for 2013/2014 which is high enough to attract payments on account.
You say your code for 2014/2015 is NT.
Unless your circumstances change I would be inclined to contact HMRC to seek the correct code to be issued. This will mean that you may not have an outstanding liability at the end of 2014/2015 as you will be taxed monthly. (You might have some tax depending on when and what code is applied)
I would then simply request your Payments on Account to be reduced to Nil on the basis that PAYE is to be operated on 2014/2015.
Please let us know how you get on as it may be that certain rules and conditions apply to seafarers that only become apparent once you have a seafaring client (which I don't)
