Payments on account are advance payments towards your tax bill each year.
When do you not have to make payments on account?
- When your tax bill is less than £1,000
- When 80% or more is paid through PAYE
When are the payments on account due?
These payments are made twice a year, on 31 January and 31 July.
This means that on 31 January you will need to pay your first payment on account for the next tax year and your balancing payment for the previous tax year. (Almost a 150% tax bill – so start saving!)
How much are the payments on account?
The payments are normally 50% of your previous tax bill and if you are self-employed, it includes Class 4 NI but excludes student loan repayments and capital gains tax.
HMRC is basically using your previous year’s tax bill to estimate your future taxable income. If you are looking for some more reading take a look at what HMRC have to say on the matter here.
A friendly reminder that from 6 April 2024 MTD for ITSA will apply – read more about what this means here.
You can get more information on Payments on Account here.
Love,
Kimmy
As always just a reminder that I am an accountant but I am not your accountant, this blog is for information purposes and should not be taken as advice.