Self Assessment taxpayers should prepare for a key tax deadline at the end of the month.
On 31 July those who pay tax by Self Assessment will be required to make a payment on account, one of two payments made by these individuals during the course of the year. This payment on account is as important, and as strictly enforced, as the 31 January deadline.
What is the payment on account?
The payment on account is designed to help taxpayers spread their Self Assessment bill. There are two of these payments made each year: the first is due on 31 January, and the second is due on 31 July.
Your payments on account are calculated by looking at your previous year’s tax bill, excepting tax deducted at source, student loan repayments, and Capital Gains Tax. Each of your payments on account will be equal to half that sum.
If you are a Self Assessment taxpayer, it is highly likely that you will be required to make a payment on account. There are only a very few exceptions. You will not be required to make a payment on account if:
- Your total tax bill for the previous year, minus tax deducted at source, was less than £1,000
- More than 80 per cent of your total tax bill was deducted at source.
What if I can’t make my payment on account?
If you are concerned that you will not be able to make your payment on account, it is important that you contact HMRC as soon as possible. You can make a ‘payment proposal’, under which you suggest a timeline by which you will settle your bill. The taxman is required to consider any reasonable payment proposal.
It is vital that you stick to any agreed payment plan. Failure to do so, or failure to contact HMRC at all, will result in legal action being taken against you.