Self Assessment Payments on Account- have you paid yours?
By PaperRocket Accounting, Jul 4 2019 10:02AM
July already, can you believe it? It seems like just yesterday we were putting the Christmas decorations away, and preparing for the 17/18 personal tax return deadline. But here we are in the middle of the year, and with the deadline for the self assessment second payment on account rapidly approaching, have you paid yours?
What are Payments on Account, and do I need to pay them?
Payments on Account (POAs) are advance payments towards your next self assessment tax bill.
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 17/18 tax bill was £5,000, you will be expected to make two POAs for the 18/19 tax year, each in the sum of £2,500. Then, when your actual 18/19 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.
But what if I know that I won’t owe that much tax next year?
If you know that your next year’s tax bill is going to be considerably lower than your current year (for example, if 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. However, we would always recommend that you exercise caution when doing this as if this results in you underpaying, HMRC will charge you interest on the underpayment amount.
When are they due?
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 have paid £7,500 by 31st January 2019 (made up of your £5000 17/18 liability plus your first 18/19 POA). You would then pay £2,500 by 31st July 2019 in respect of your second POA. Any balancing payment for 18/19 would then be due by 31st January 2020, and so the cycle continues.
With this all this in mind, second POAs for the 18/19 tax year are due in less than a month, by midnight on 31st July 2019. So, don’t put it off, and make sure that payment is made before the deadline. HMRC will charge interest on any overdue POAs so get that second POA paid today!
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