HMRC Payment on Account Due 31 July
Self-employed contractors have just a few days left to pay their payment on account.
The second annual tax installment is due on the 31 July and is payable by anyone who is self-employed, or anyone that has substantial income not paid by an employer or pension provider.
Most contractors will have already paid the bulk of their income tax before the first January 31 deadline. The payment on account system means that contractors pay an advance on what the taxman thinks they will owe for the current tax year.
The July 31 payment will reduce what you have to pay next year.
HMRC will have said how much you owe in July when you completed your last tax return. They may also have sent a letter in the last few weeks reminding you how much you owe.
If a payment on account made in July is too much then HMRC will refund the difference when you come pay your next installment before January next year.
You can check how much you owe and settle the payment on account online.
HMRC has overestimated my payment on account
HMRC estimates the next year’s tax bill based on how much you paid in the previous year. If you will earn less this year compared to last year, then you can apply to have your payment on account reduced.
If you paid your tax return online then you can log into your HMRC account and click ‘payments on account’.
Make sure you don’t underestimate how much you expect to earn because HMRC may charge you interest on any underpayment.
I can’t afford to pay
If you can’t afford the payment on account, you may be able to reduce it if you speak to HMRC.
The taxman may allow you to spread repayments or pay later, but you should contact HMRC as soon as possible.
HMRC will only agree to alternative payment terms if you prove you can’t pay.
They may ask for information about your income and expenditure as well as any assets, savings and investments. You will also be asked about how you plan to get your tax payments back in order.
If you can’t afford to pay and HMRC will not agree to alternate payment terms then you may be able to borrow money to meet the tax bill. Remember that you will pay interest on any debt.
What if I pay late?
The good news is that there is no late payment fee on the payment on account, as there is if you file your tax return late. But HMRC can charge you interest on any late payments of 2.5%.
For more information and advice, speak to a member of our accountancy team today. Call: 0800 121 6513.