Ainsworth & Co, Chartered Accountants and Business Advisors.

Tax Payments On Account - UK Income Tax & NI


Our Self Assessment service is provided to clients in England and Wales.

This webpage is a guide to tax "Payment On Account".

Self Assessment - Payments On Account


Income Tax & National Insurance must be paid in full by 31st January for the previous tax year.

For example: for Tax Year 2017/18, (tax year ended 5th April 2018) Income Tax & NI is payable in full by 31st January 2019.

So for many people (including small businesses), Tax and NI is not payable until neary 10 months after the tax year has ended, which leaves plenty of time to set the money aside.

But, when the Income Tax & Class 4 National Insurance payable is greater than £1,000, then this triggers HMRC's "Payment On Account" requirement - for the current year - the year that you are in, so the 10 months' delay is lost.

Other people to be 'caught' in this advance tax payment requirement are people receiving substantial dividends from their own company. This is now a more common occurrence since the major changes to dividend tax from 2016/17.

Payments On Account are collected in the January of the tax year itself and then the following July (ie. 6 months later).

So, Payments On Account are in the two equal instalments:
• 31st January
• 31st July
• any balance of Tax & NI still owing (after the Self Assessment has been filed) has to be paid by the following 31st January as usual.

For example, the tax payment dates for the 2017/18 tax year (6th April 2017 to 5th April 2018) are:
31st January 2018
31st July 2018
• any balance of tax still owing (after the Self Assessment has been filed) has to be paid by 31st January 2019.


How the Payments On Account are calculated


The January and July Payments on Account are 50% each, of the Tax and NI due for the previous year.

Example:
For 2016/17, a web designer has Tax and Class 4 National Insurance calculation of £1,500, which was payable by 31/1/2018. And this is the first time that the web designer's Tax and NI has been over £1,000. Now Payments On Account must start.

In addition to the £1,500 for 2016/17 which must be paid by 31/1/2018, the web designer must also pay Payments On Account for 2017/18 as follows:

31st January 2018 £750
31st July 2018 £750
• any balance of Tax & NI still owing for 2017/18 has to be paid by 31st January 2019.

This may be a surprise for the web designer who was expecting to pay £1,500 on 31/1/2018, and now finds that a total of £2,250 must be paid on 31/1/2018, and a further £750 on 31/7/2018. So that's double the Tax & NI over a 6 month period.


What happens next year with Payments On Account?


Continuing the web designer example:

If for 2017/18, the Tax and Class 4 National Insurance and Class 2 National Insurance is finally calulated as £1,800 based on the profit for that year, this is what happens:

Total Tax & NI Calculation: £1,800
Payments On Account: £750 31/1/18 and £750 31/7/18 = £1,500 paid on account
Balance payable 31/1/19: £300


Then HMRC calculates Payments On Account for 2018/19 at 50% of the 2017/18 Tax and NI calculation, so 50% of £1,800:

31st January 2019 £900
31st July 2019 £900
• any balance of Tax & NI still owing for 2018/19 has to be paid by 31st January 2020.


HMRC Link:
Payments On Account


How to pay your Self Assessment


This UK.GOV link explains the options for paying Self Assessment:
Pay your Self Assessment tax bill.


What is Self Assessment ?


Self Assessment is the UK Tax Return for individuals. You can do the Self Assessment yourself or ask an accountant or other person to do it for you.

There are more details on our Self Assessment webpage.


Tax Services


Our Services can save you the time and the hassle. We will prepare your Income Tax calculations and Self Assessment and submit them to HMRC.

Our Tax Services also include:
VAT
Payroll / PAYE
P11D
CIS


Tax Investigations


Tax investigations can be very stressful. We recommend that you get expert advice and we will be able to recommend the necessary expertise.

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To register your business yourself, this can be done online by setting up a Government Gateway account or by using HMRC form CWF1