If you have a calculated personal tax bill exceeding £1,000 – you will probably need to make payments on account towards your Self Assessment tax bill for the following tax year.
The purpose of payments on account is to help you spread your tax payments throughout the year; saving you from having to make one large payment for the full amount come January. Another way to look at them is that they are advance payments towards the tax bill you will owe for the current tax year.
The amount is calculated by looking at your previous year’s tax bill and is then payable in two separate instalments.
Your first payment on account
If you have never submitted a Self Assessment before, then HMRC will not have asked you to make any payments on account.
When you come to file your Self Assessment you may be in for a surprise – as well as your tax bill due by the 31st January, HMRC also expect your first payment on account towards your next year’s tax bill. This will equal 150% of your tax bill that needs to be paid at once. It’s a little painful in the short term but levels out in future tax returns.
Taking these steps will help you see exactly what you need to pay come 31st January and give you plenty of time to save some additional cash if you are a little short.
Example
Sophie has just completed her first ever Self Assessment tax return for tax year 2023/24. The amount she owes for 2023/24 tax year is £3,000 and will need to be paid to HMRC before the 31st January 2025.
To spread Sophie’s tax bill for the next tax year, 2024/25, she will also need to make a payment on account of £1,500 (50% of the previous years tax) to HMRC before the 31st January 2025. Therefore her total bill for 31st January 2025 is £4,500.
The next payment that Sophie will make is for the 2024/25 tax year, this is the next 50% payment on account (£1,500) that is due by 31st July 2025.
Payment dates
The first payment is due on 31st January, the same day as your balancing payment which clears your tax bill for the previous year. The second is due on 31st July. This is designed to help you spread your payments into two more manageable lump sums. Each instalment is normally 50% of your previous year’s tax bill.
Unfortunately, the payments on account are not voluntary payments. However, they can be reduced if you think your income will be lower in the current tax year. Please be aware, if you reduce your payments below the amount that actually becomes payable once your 2025 Self Assessment return has been completed there will be interest, and potentially penalties, charged on the underpaid amount.
Once your 2024/25 Self Assessment Tax Return is submitted, if the actual amount of tax due is less than the payments on account made then the difference will be refunded by HMRC. If the payments on account are less than the total tax due, the balancing amount will be payable by 31st January 2026.
Example
Rory paid £4,000 in total for tax for the 2023/24 tax year. To help towards his 2024/25 tax bill he would need to make a payment on account of £2,000 by 31st January 2025 and then a second payment of £2,000 by 31st July 2025.
Once his Self Assessment had been filed for the 2024/25 tax year, any balance over the £4,000 he has already paid would be due by the 31st January 2026.
How to check and make your payment on account
You can check if you need to make a payment on account by going to your government gateway.
There are different ways to pay HMRC and the time you need to allow for your payment to reach them depends on your payment method.
The SA302 is helpful when making payments as it shows the total due by the deadlines and your UTR number. When making a payment using online banking you’ll need to give an 11 digit payment reference which is your UTR number followed by the letter ‘K’.
If inniAccounts have filed your return for you, you’ll find copies of your Self Assessment Tax Return and SA302 in your company’s documents.