The second instalment of 2018-19 self-assessment tax returns, known as a payment on account, is due on 31st July.
All taxpayers responsible for calculating and paying their own tax bills, as opposed to being taxed by an employer or pension provider via PAYE, must use HM Revenue and Customs’ (HMRC) self-assessment platform to settle their annual tax bill based on their income.
Self-assessment is not only for self-employed professionals. It’s also a system for employed individuals who earn a second income, as well as property landlords that earn a rental income from their portfolio.
Payments on account are designed to act as an advance payment, spreading the expected cost of your tax bill for the next tax year.
If your self-assessment tax bill amounts to £1,000 or more, you will need to make a payment on account, unless more than 80% of this was collected at source e.g. your PAYE tax code.
The first payment on account was due at midnight on 31st January 2019, before the end of the tax year in question. The first payment is based on 50% of the tax bill of your previous year i.e. 2017-18.
The second payment on account is due at midnight on 31st July 2019, after the end of the 2018-19 tax year. This equates to another 50% of the tax bill of your previous year.
If you still have tax to pay after you’ve made both payments on account, you will be required to make an additional ‘balancing payment’ before 31st January 2020.
What happens if I my payments on account are higher than my tax bill?
In this event, HMRC will refund the difference in the form of a tax rebate, as soon as possible.
If you experience a fall in profits or taxable income one year, it’s also possible to ask HMRC to reduce your payments on account if you’re confident your tax bill will be lower than the previous tax year.
As with all tax matters throughout the financial year, if you are confused about your tax obligations, please don’t hesitate to contact us for friendly, experienced advice.
Your local TaxAssist Accountant can help you make sense of your payments on account in advance of the upcoming deadline.
To arrange a free initial consultation on your self-assessment situation, call us today on 0800 0523 555 or drop us a line using our online enquiry form.