A Payment on Account is a tax payment that is made twice a year by the self-employed or those with a tax liability of more than £1,000 and helps spread the cost of their tax bill. HMRC calculate the amount due based on your tax liability for the current year and the total due is then split into 2 payments.
The first instalment is due 31 January (which coincides with the Self-Assessment deadline) and the second 31 July. The payment on account includes Class 4 NI Contributions (if applicable) but not student loans or Capital Gains Tax.
If you have completed your Self-Assessment on-line then you should pay your Payment on Account on-line as well. If not, then HMRC will send you a Bank Giro to pay.
As with many that are self-employed, income can fluctuate year on year. Therefore, if you feel that your income for the coming year will be less than the previous year, you can apply for the Payment on Account to be reduced. This can all be done on-line or by sending form SA303 to your tax office. However, do be aware if it later results in you underpaying then HMRC will charge interest on any outstanding amounts.
If you need further information help with your Self-Assessment or Payments on Account then give us a call on 0113 2864486.
Source: HMRC
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