What Self-Employed clients need to know?
Payment on account is a system used by HMRC to collect tax from self-employed individuals and businesses in the UK. It involves making two advance payments towards your tax bill for the following tax year.
Who needs to make payments on account?
You are required to make payments on account if your tax bill for the previous tax year was more than £1,000.
When are payments on account due?
The first payment on account is due on 31 January and the second payment is due on 31 July.
How to make payments on account?
You can make payments on account online, by phone, or by post.
Tips for managing payment on account
Estimate your tax bill early and set up a dedicated savings account for your payments on account. This will help you to keep track of your savings and make sure you have enough money available when you need it.
Consider using a payment plan if you're struggling to make the full payment on account amount. HMRC may be able to agree a payment plan with you, which will allow you to spread the cost of your payments over a longer period of time.
What if I miss a payment on account deadline?
If you miss a payment on account deadline, you will be charged interest and a penalty. The interest rate is 5% per year and the penalty is 5% of the unpaid amount.
Conclusion
Payment on account is an important part of the UK tax system for self-employed individuals and businesses. By understanding your obligations and planning ahead, you can avoid late payment penalties and ensure that you meet your financial commitments.
If you have any questions about payment on account, please contact us for advice.