With only a week to go – are you ready to make your payment on account for self-assessment
With only a week to go – are you ready to make your payment on account for self-assessment
The payments on account scheme is designed to help people better manage the cost of their tax bill by splitting the amount into two payments and spreading the payments across the year. However, missing the deadline can be a costly mistake to make.
Fortunately, there are still a few days to go until the second payment on account is due on 31 July, giving people time to work out what they owe and to make the payment.
If, when you have filed your self-assessment tax return for the year, your payments on account do not fully cover the tax liability then a ‘balancing payment’ will have to be made by 31 January, following the end of the tax year in question – for 2023/2024, this will be 31 January 2025.
Payments on account are advance payments towards tax bills and include Class 4 National Insurance for those who are self-employed. Taxpayers have to make two payments on account each year. These are calculated using their tax bill from the previous tax year. The second payment is due by midnight on 31 July.
If the payments on account are more than the tax liability, a refund will be made by HMRC, although this will not be automatic and either you or your accountant will have to ask for it to be paid.
Who needs to pay?
The deadline applies to all those who are self-employed unless:
• they owe £1,000 or less as this can be made in a single payment on the first return; or
• they have already paid more than 80% of the tax owed.
How to reduce payments on account
If you know that your next tax bill will be less than the previous tax bill, you can either contact your accountant or HMRC directly to reduce the amount due.
There are three ways to do this:
• speak to your accountant as they will have agent authority and be able to reduce the payment on account on your behalf;
• complete a SA303 form and post it to HMRC; or
• sign into your online personal tax account and complete the necessary steps to reduce the payments on account.
It is important to note that, if the payments on account are reduced to below what they should be, interest will be charged on the deficit.
What happens if you miss the deadline?
If you miss the deadline, late payment interest will be charged. This currently stands at 7.75%, making it even more important to file a return on time. Penalties can also be applied to late payments on account. If you can’t make the payment, you should get in touch with HMRC as soon as possible to try to set up a time to pay arrangement.