Many of you will now have submitted your self-assessment tax return and have made your first payment due on 31st January. This is a payment towards the current tax year and half of the previous year’s liability and is called your first payment on account.
You then have a second payment on account to make on 31 July.
Most businesses let their accountant deal with everything and then they make the payments when they are due. We thought it would be useful to explain what payments on account means so that you know why the payments are being made.
If you are self-employed the payment on account includes your National Insurance contribution payment. Each year you make 2 payments as mentioned above, however, payment is not required if:
- your last Self -Assessment tax bill was less than £1,000
- you have already paid more than 80% of all the tax you owe through PAYE.
If you still have tax to pay after you have made your payments on account, you must make a ‘balancing payment’ by midnight on 31 January the following year.
If you know that the following year your income will be less than this year it is possible to reduce your payments on account. This will help you to manage cash flow for the year ahead.
If you would like any advice or help to understand your self-assessment tax return, then please do call us on 01623 490 120 or email