You may have recently received a reminder from HMRC to make your second self-assessment payment on account for the 2017-18 tax year. Every year at a4c we are asked what this means by very confused clients (who said tax doesn’t have to be taxing?).
Payments on account are advance payments made towards your personal tax for each tax year. These are made on 31st January and 31st July.
How much you have to pay is based on your previous year’s tax return, with 50% being paid at each deadline. So if your tax bill in 2016/17 was £8,000 then you will be required to make the following payments on account:
- First payment on account 31st January 2018 £4,000
- Second payment on account 31st July 2018 £4,000
- Balancing payment (any extra tax due for 2017/18) due 31st January 2019
Everyone is required to make payments on account unless:
- your previous tax return tax bill was less than £1,000; or
- more than 80% of the tax you pay is deducted through PAYE
Can you reduce your payments on account?
Yes, if you predict that your tax bill in the next tax year is likely to be lower then you can apply for reduced or removed payments on account.
Beware though if your tax bill is not lower and payments on account should have been made then HMRC will charge you late payment interest.
How do you know what to pay?
The SA302 tax summary calculation for 2016/17 will show the first and second payments on account, payable 31st January 2018 and 31st July 2018. If a4c prepared your tax return then you would have been given a copy of this document along with your full tax return.
HMRC may also send a statement of your account in early July as a reminder of forthcoming tax owed.