If you are a self-employed worker with years of experience, you probably know all about payments on account. But if you are new to the whole area you might be left with a number of questions about these payments – when, how, to who? Don’t worry, you are in safe hands. Let the tax experts at DSR Tax Refunds fill you in on all the details. You might be eligible for a tax refund too, so why not check out our handy online calculator or give our friendly team a call on 0330 122 9972.
What are payments on account?
If you are an employee and pay your taxes through the PAYE system then you don’t need to concern yourself with payments on account because they don’t apply to you. But if you are self-employed and deal with your own self-assessment and tax affairs, then you need to know about payments on account. These payments are payments that you make towards your tax bill for the following tax year. There are two payments dates each tax year and on each date, you have to make a payment of 50% of your previous year’s tax bill. So if last year, your tax bill was £3000 – in January and July, you will need to make a payment of £1,500 each time. This way, HMRC allow you to spread the cost of your tax bill instead of asking you to make one big lump payment.
You only need to make payments on account if your tax bill is over £1,000 per tax year.
How are they calculated by HMRC?
It’s pretty simple. HMRC assume that you will earn a similar amount each year, so on 31st January, when you file your self-assessment tax return, you will also be expected to make your first payment for the following year. The second payment will be due on 31st July.
Each payment will be 50% of the previous year’s tax bill.
If you are sure that you won’t be owing as much tax next year, you can apply to HMRC to have your payments on account reduced.
Who would be liable to make payments on account?
If you are self-employed and have a tax bill of over £1,000 then you will need to make payments on account, for both your tax deductions and for your National Insurance contributions. HMRC will inform you of whether you need to pay them and the amount you need to pay when you sign into your self-assessment account.
How you make payments on account?
There are a number of ways you can make your payments on account. These are by:
- Online banking
- Phone banking
- Online with a debit or credit card
- BACS or CHAPS bank transfer
- Direct debit
- At your bank, building society or at a Post Office.
What if you think you will miss the deadline for payment?
HMRC can levy a hefty penalty on any missed payments on account so it is really important to pay them on time and if you are sure that you are going to miss the deadline then you need to contact HMRC as soon as possible. Of course, if you are a DSR Tax Claim client then you will know that we deal with HMRC on your behalf so you don’t have to so get in touch with our helpful team on 0330 122 9972 and we will sort things out for you.
Of course, you might be owed a tax refund for other allowable expenses and DSR Tax Refunds aim to get you your maximum refund fast, so call our team of experts on 0330 122 9972 and let us get your money back to you where it belongs.