If you’re new to self-assessment, you may have come across the concept of payments on account for your tax bill. In this blog, we’ll take a closer look at what these are and who needs to pay them.
What Is a Payment on Account?
A payment on account is basically an advance payment. You may be asked to make a payment on account when you submit your self-assessment tax bill.
When Does This Come Up?
This comes up if you are self-employed and completing your self assessment tax return. You might do this yourself or through Tewkesbury accountants such as www.randall-payne.co.uk/services/accountancy/tewkesbury-accountants/, who carry out bookkeeping and tax return services for their accountancy clients.
When Is My Tax Return Due?
You can submit your tax return once the year in question finishes. The tax year runs from 6th April to 5th April the following year. If your tax bill is going to be over £1,000 by your calculations, you’ll be asked by HMRC to make a payment on account at the point when you see your tax calculation figure. This can be an unwelcome surprise if you aren’t expecting it!
What Are Payments on Account?
These are advance payments that you’ll make twice a year to contribute towards the tax bill for the following year. In essence, it means that you’ll need to pay your current year tax bill and then half of the anticipated tax bill for the following year. By paying on account, you are ahead of the game with your tax due, but it means you must come up with the payment in advance, which can be difficult for some people.
What If You Can’t Afford Your Payment on Account
The best thing to do is to get in touch with HMRC to arrange a ‘time to pay’ arrangement. This could be agreed as a monthly or weekly contributory payment towards the account payment due. By flagging up your concerns to HMRC in advance, you have the best chance or arranging a suitable payment option that doesn’t leave you in financial difficulty.