Posted July 28, 2017

Payments on Account July Deadline, what you need to know

We are currently nearing the 31 July deadline for your second Payment on Account. But what does this mean and how does it work?

Payments on Account are advance payments towards your self-assessment tax bill. Two of these payments are made each year, and each payment is half your previous year’s tax bill. They are due by midnight on January 31st and July 31st. HMRC recommends these payments are not left until the deadline as this gives an opportunity to receive help and support from your tax adviser or accountant, providing time for planning and identifying efficiencies.

Payments on Account are relevant to UK tax payers if your Income Tax and class 4 National Insurance totals to be more than £1,000, and where less than 80% of your income has tax deducted at source, which is tax deducted from your income before you receive it. Below is an example from the HMRC website for Payments on Account.

Example

Your bill for the 2016 to 2017 tax year is £3,000. You made 2 payments on account last year of £900 each (£1,800 in total).

The total tax to pay by midnight on 31 January 2018 is £2,700. This includes:

your ‘balancing payment’ of £1,200 for the 2016 to 2017 tax year (£3,000 minus £1,800)
the first payment on account of £1,500 (half your 2016 to 2017 tax bill) towards your 2017 to 2018 tax bill

You have to pay your second payment on account of £1,500 by midnight on 31 July 2018.

If your tax bill for the 2017 to 2018 tax year is more than £3,000 (the total of your 2 payments on account), you’ll need to make a ‘balancing payment’ by 31 January 2019.

If your income is significantly lower than the previous year, you can request HMRC to reduce your Payments on Account by sending a SA303 form.

Here to help

If you are completely unable to pay, then you need to get in touch with HMRC as soon as possible. If you ignore the problem it will only get larger. Luckily, here at Whitesides Chartered Accountants in Leeds, we provide the help and support you need to deal with your self-assessment tax bills and other tax related subjects.

Payments to HMRC can be done through online or telephone banking, Bacs, Direct Debit or by cheque. They’re quite flexible but depending on the payment method it’s best to give several working days to ensure that payments are processed in time before the deadline. For more, check out the HMRC website on this topic through the link provided: https://www.gov.uk/pay-self-assessment-tax-bill

Useful Resources and Websites:

https://www.gov.uk/understand-self-assessment-bill/payments-on-account

https://www.youtube.com/watch?v=lpKVVT47D9c

Self Assessment form to reduce claim to reduce payments on account (SA303):

https://www.gov.uk/government/publications/self-assessment-claim-to-reduce-payments-on-account-sa303