If you are a new entrant in the self-assessment system you may not be aware of the Payments on Accounts process and how it works.
'Payments on account' are advance payments towards your personal tax bill. You have to make two payments on account every year (due by 31 January and 31 July) of half your previous year's tax bill unless:
- your last Self Assessment tax bill was less than £1,000
- you've already paid more than 80% of all the tax you owe, for example through your tax code or because your bank has already deducted interest on your savings
Once you have made your payments on account, if you still have tax to pay you must make a 'balancing payment' by 31 January next year.
For example: Your bill for the 2017 to 2018 tax year is £3,000.
The total tax to pay by midnight on 31 January 2019 would therefore be £4,500. This includes:
- your 'balancing payment' of £3,000 for the 2017 to 2018 tax year
- the first payment on account of £1,500 (half your 2017 to 2018 tax bill) towards your 2018 to 2019 tax bill
You have to pay your second payment on account of £1,500 by midnight on 31 July 2019.
If your tax bill for the 2018 to 2019 tax year is more than £3,000 (the total of your two payments on account), you'll need to make a 'balancing payment' by 31 January 2020.
If your tax bill for the 2018 to 2019 tax year is less than £3,000, HMRC may send you a refund.
Payments on account don't include anything you owe for capital gains or student loans- you'll pay those in your 'balancing payment'.