So What’s This 31st July Payment On Account Deadline And Does It Apply To Me?
A Payment on Account is a tax payment made twice a year by self-employed people in order to spread the cost of the year’s tax. It is calculated by looking at your previous year’s tax bill, and is due in two instalments – one on 31st January and on 31st July. The Payment on Account can be thought of as a way of paying off some of your tax bill in advance.
HMRC will insist you make payments on account if your previous year’s tax bill was £1,000 or more – so, for example, if your tax bill for the tax year 16/17 was £2,000 then by 31st January 2018 you have to make a payment of £2,000 for the tax owed + a payment on Account of £1,000 (50% x £2,000) = £3,000. You would need to make another payment on account of £1,000 by 31 July 2018.
Tax tip– if you think that your business income for 16/17 is less than previous year 15/16 meaning that you expect your tax bill for 16/17 will be lower, then it’s worth completing your tax return before 31st July and applying for a reduction in your July payment on account to help with your cashflow!