When submitting your self assessment tax return you may have come across the term ‘payment on account’. We often get asked what this means and why it’s necessary.

Submitting a self-assessment tax return can be tricky especially if it’s your first time doing it. You’ve got to make sure everything you claim for is correct and backed up with evidence and that you’re not missing out on vital expenses. Once submitted you’ll discover it’s not just one payment you have to make but 2!

These payments are what HMRC call payment on account. They are advanced payments towards your tax bill and must be paid by midnight on 31st January and 31st July each year.

How is this worked out?

Once you submit your self assessment your tax bill is calculated accordingly. You will be given a breakdown of what you owe plus what you have to pay towards your next tax bill which will be split into 2 payments. One to be paid in January and the other in July. Your payments on account also include Class 4 National Insurance Contributions where applicable. 

What if I can’t pay what I owe?

HMRC don’t take too lightly to not being able to pay your tax bill. There’s an option to enter a time to pay agreement which you can do online, unless you’ve already entered into an agreement before. If you have you will need to call HMRC as soon as you are aware you can’t make the payment. You’ll then be asked lots of questions about why you can’t pay your tax bill, they’ll ask you to confirm all your incoming and outgoing transactions and if you have savings you’ll need to use these to pay towards your tax bill before they will agree to let you pay over time. One thing to note is that when you pay over time, you will be charged interest so it’s always best to put money aside to pay your tax bill. You don’t want to pay the tax man more than you need to!

If you worry about saving for your tax, why not hire a bookkeeper? Our fees are tax deductible and we can point you in the right direction when it comes to planning ahead for your tax bill.