Every July, many people receive a reminder from HMRC about their Self Assessment Payment on Account and wonder why they are being asked to pay tax before they’ve even submitted their next tax return.
If you’re self-employed, a sole trader, a landlord, or receive income that requires you to complete a Self Assessment tax return, understanding how Payments on Account work can help you avoid unexpected bills and late payment interest.
What is a Payment on Account?
A Payment on Account is an advance payment towards your next Self Assessment tax bill.
Rather than paying all of your tax after your tax return has been submitted, HMRC may ask you to make two advance payments during the year. These payments are based on your previous year’s tax liability.
When are Payments on Account due?
There are two Payment on Account deadlines each year:
- 31 January – First Payment on Account
- 31 July – Second Payment on Account
If you also owe any remaining tax for the previous tax year (known as a balancing payment), this is normally due on 31 January.
Who needs to make Payments on Account?
You will usually need to make Payments on Account if:
- Your previous Self Assessment tax bill was more than £1,000, and
- Less than 80% of your tax was collected through PAYE or other deductions.
Not everyone who completes a Self Assessment tax return will need to make Payments on Account, so it’s important to understand how the rules apply to your own circumstances.
What if your income has fallen?
If you expect your income to be lower than it was in the previous tax year, you may be able to apply to reduce your Payments on Account.
However, any reduction should be based on a realistic estimate. If your payments are reduced too much and your final tax bill is higher than expected, HMRC may charge interest on the shortfall.
Don’t leave it until the last minute
Checking your HMRC account before the deadline gives you time to understand what is due and arrange payment if necessary.
Leaving it until the final day can create unnecessary stress and may result in late payment interest if the payment is not made on time.
How Mays Accounting Services can help
At Mays Accounting Services, I help individuals, sole traders and small businesses across Birmingham and the surrounding areas understand their Self Assessment obligations and prepare accurate tax returns.
If you’re unsure whether a Payment on Account applies to you, or you’d like help with your Self Assessment tax return, I’m here to help.
Need help with your Self Assessment Tax Return?
📱 Mobile: 07300 195409
📧 Email: enquiries@maysaccountingservices.co.uk
🌐 Website: www.maysaccountingservices.co.uk