With the deadline looming, don’t delay! Pay that second Payment on Account today!
By PaperRocket Accounting, Jul 10 2018 10:56AM
The end of July is rapidly approaching, and it brings with it the deadline for payment of any second payments on account (POAs) that may be due. So, with time running out, have you paid yours?
What are Payments on Account?
Payments on Account (POA) are advance payments towards your next self assessment tax bill.
When would I be expected to make Payments on Account and how will I know if I am expected to pay them?
If your self assessment tax bill is over £1,000, then HMRC will expect you to make payments on account in respect of the next tax year (unless you have already paid more than 80% of the tax owed (e.g. salary taxed at source).
If your accountant prepared your self assessment return for you, they will have advised you if any POAs are due. Alternatively, if you filed your return yourself, this will have been flagged to you when the tax was calculated. If you have an online account with HMRC, you can always login to this to check as well.
How are they calculated?
Your POAs will be determined based on your previous year’s self assessment tax bill, and each POA will be calculated as 50% of that tax bill. So, as an example, if your 16/17 tax bill was £4,000, you will be expected to make two POAs for the 17/18 tax year, each in the sum of £2,000. Then, when your actual 17/18 tax liability is calculated, you will need to either make a balancing payment for any additional tax due, or you will receive a refund if you have overpaid.
If you know that your next year’s tax bill is going to be considerably lower than your current year (maybe you had a large one off source of income one year that will not be repeated the next), and therefore by paying the standard POAs you will greatly overpay the actual tax due, you can put in a claim to reduce your payments on account. It is always advisable though to err on the side of caution when it comes to reducing these payments as if this results in you underpaying, HMRC will charge you interest on the underpayment amount.
When are they due by?
Your first payment on account will be due with your current year’s tax liability by 31st January. The second payment on account will be due by 31st July.
So, using the above example, you would pay £6,000 by 31st January 2018 (made up of your £4000 17/18 liability plus your first 18/19 POA). You would then pay £2,000 by 31st July 2018 in respect of your second POA. Any balancing payment for 18/19 would then be due by 31st January 2019.
This therefore means that any second payments on account in respect of the 18/19 year are due in just a few weeks time, by midnight on the 31st July 2018. So, don’t delay! HMRC will charge interest on any overdue POAs so get that second POA paid today!
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