The £8,000 you’re due to pay by the end of January is in respect of 2017/18.
However, if you’re tax bill is in excess of £1,000 and you’ve paid less than 20% of your tax at source (for example through PAYE on your wages), then you will be expected to make Payments on Account. These are instalments for next year’s tax bill and are normally 50% of your current year’s bill. As you’ve said, the first one is paid in January and the second in July.
Moving forward, they are designed to smooth your tax payments but in the first year, they can be quite a hit to the cashflow, as you will essentially be paying 1.5 times your tax bill this January.
If you think your income and tax bill will be lower next year, you may opt to reduce your Payments on Account. If you reduce your Payments on Account too low, you’ll be charged interest. If they are too high, HMRC will of course refund you.
If you'd like help with your tax affairs, please contact your local TaxAssist Accountant. Using an accountant should ensure that you're claiming all of the expenses and allowances you're entitled to and they could explore where your Payments on Account for 2018/19 could come down.
By Jo Nockels
Disclaimer: Advice shared in this blog is intended to inform rather than advise. Taxpayer's circumstances do vary and if you feel that the information provided is beneficial it is important that you contact us before implementation. If you take, or do not take action as a result of reading this forum, before receiving our written endorsement, we will accept no responsibility for any financial loss incurred.