Don’t Forget Your July 31 Payment on Account
If you pay taxes through HMRC’s Self Assessment system, you need to make sure you settle your second payment on account by the end of this month.
A payment on account is an advanced payment towards your tax bill, including income tax and Class 4 National Insurance if you’re self-employed.
Self-assessors make two payments on account each year unless their last tax bill was less than £1,000 or they have already paid more than 80% of the tax owed.
The first payment is due by January 31 and the second is due by July 31.
Each payment makes up half of the previous year’s tax bill, so if you paid £5,000 in total for 2018-19 then your 2019-20 payments on account will be £2,500 each.
If you earn more (or have more tax to pay) in this tax year than you did in the last tax year, you will have to make another ‘balancing payment’ by 31 January next year.
If you know that you are going to earn less or pay less tax in the current tax year, then you can apply to HMRC to reduce your payment on account.
Payments on account don’t include anything owed for capital gains or student loans. These will be covered in the balancing payment.
Miles Grady, Director of Umbrella.co.uk said: “It’s difficult to forget about the January 31 deadline because the date gets so much media coverage. But with the excitement of summer holidays and the traditional summer slump, it is easy to miss the second payment on account date, particularly if you are new to contracting or freelancing.
“HMRC should have sent a reminder letter earlier in the summer letting you know how much you need to pay. But a technical fault in January left some people unsure if they needed to make a payment. If you are uncertain, it’s best to contact HMRC. They will also let you know how much you need to pay by the end of the month.
“If you have earned less in the first few months of this tax year or you plan to take an extended holiday later in the year, make sure you let HMRC know because this can reduce your payment on account.”
For more information, speak to a member of the team today. Call: 0800 121 6513.