Payments on account are advance payments towards your tax bill, and the next deadline is fast approaching: 31 July 2023.
You might be scratching your head at this and asking, ‘didn’t I already pay tax earlier this year’? And you’d be right, but there are two deadlines, not just the one on the 31 of January.
So let’s dive into what you must do to meet this deadline and avoid fines or investigation.
When do I pay payments on account?
There are two payment on account deadlines each year;
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- 31 January for your first payment on account
- 31 July for your second payment on account.
These are advance payments towards your next tax bill. Each one is half the amount of your previous year’s tax bill.
Alongside income tax, you’ll also have to pay any owed class 4 National Insurance contributions you owe if you’re self-employed.
You’ll need to settle any existing balance after your first two payments on account deadlines by midnight 31 January of the following tax year. This is known as your ‘balancing payment’.
Deadlines vary depending on when you actually set up your business — for example, if you registered in October 2023, your first tax year would be 2023/24. This means your first self-assessment payment won’t be due until 31 January 2025.
How to pay my balance
To check your balance, make a payment, and do anything else payment on account related, you’ll need to sign in to your online HMRC account.
Here you can check what you owe and read the latest details on your self-assessment tax return.
If your bill is less than £3,000 and you submitted it in December, you can pay your balance via your tax code — payments will be automatically deducted from your wages or pension on an agreed schedule with HMRC.
You may want to pay your bill outright, however, so the earlier you find out what you owe, the quicker you can decide.
How do I reduce my payments on account?
The business world continues to be increasingly inconsistent — with a cost of living crisis and recession hampering growth across the UK, it’s not guaranteed that you’ll make the same amount of money each year.
In the event of an expected change of income, or significant loss, you can discuss your tax situation with HMRC.
If you know your tax bill will be lower, you can ask HMRC to reduce your payments on account either online or by post.
What is the best way to avoid this altogether? Start tax planning as soon as possible.
Tax planning will make the difference
With the July deadline fast approaching, we’d advise getting in touch with us now if you need help with your payments on account.
By doing the work early — whether that’s planning for your self-assessment, or assessing your expenditure — you’ll have the best possible chance to save tax. Better still, with a good plan you’ll know how the rest of your year is looking and can assess your options to make it a more profitable one as a result.
And not only will you be able to plan for your payments on account deadlines, but you’ll also be able to find out if HMRC owes you a tax refund sooner.
Are deadlines stressing you out? Talk to us
Tax bills are unavoidable, yes. But they shouldn’t cause you any extra stress. Sometimes all you need is a chat with someone who’s seen how they work many times.
That’s us — we’re an expert accounting firm with years of experience helping businesses not unlike yours get the best result possible from their tax returns. We’ll create a plan that works simply and efficiently to reduce tax or overpaying.
Get in touch with us today to discuss the payments on account deadline.