Payment on account

[Chris S]

I've just filled in my self assessment tax form online. My tax comes to about £2,600 but they want another £1,300 for 'payment on account'. The total amount that they have asked me to pay by the end of the year is about £3,900.

Do I have to make the £1,300 payment on account? As far as I can see this is a future payment for the next tax year. Can they penalise me if I don't pay it? I am reluctant to do so as most of my income comes from interest which is likely to be a lot less next year.

 

[fossyant]

I'm afraid you do have to pay it, unless you can discuss with them, but it's unlikely. You know the saying - you earn it, you pay tax. Only means potentially you'll pay less tax come the end of the year. I assume you put the funds aside every month for the tax anyway ?

 

[SpokeyDokey]

I've just filled in my self assessment tax form online. My tax comes to about £2,600 but they want another £1,300 for 'payment on account'. The total amount that they have asked me to pay by the end of the year is about £3,900.

Do I have to make the £1,300 payment on account? As far as I can see this is a future payment for the next tax year. Can they penalise me if I don't pay it? I am reluctant to do so as most of my income comes from interest which is likely to be a lot less next year.

I think you do have to pay it, it is not optional.

By the end of July is the due by date I believe.

You can ask for a more amenable payment plan but I do not know if they will factor in your change in circumstances.

 

[CXRAndy]

Yes you do, I've had to do the same

 

[T4tomo]

I've just filled in my self assessment tax form online. My tax comes to about £2,600 but they want another £1,300 for 'payment on account'. The total amount that they have asked me to pay by the end of the year is about £3,900.

Do I have to make the £1,300 payment on account? As far as I can see this is a future payment for the next tax year. Can they penalise me if I don't pay it? I am reluctant to do so as most of my income comes from interest which is likely to be a lot less next year.

The payment on account system is there so if they expect you to owe similar tax on untaxed income (like bank interest etc) they collect some it during that year. The only way to not pay it is to speak to them are have a fairly solid reason why you wont be earning such interest, even then you're likely to get a computer says no answer.

I managed it one year when I switched from paying myself dividends from my Ltd co and went back into "normal" PAYE employment.

 

[fossyant]

They are also not accommodating if you owe tax. My son owed tax as he had a company van for a short time, but his employer didn't set it up correctly. Come end of tax year, you owe us £400. Son's been out of work for six months, so has had to enter a payment plan as he's not earning enough - they literally sent it to debt collectors almost immediately (son isn't very organised). He's been PAYE, but now has to do the self assessments due to having had a van.

 

[Drago]

Yes you do, I've had to do the same

I haven't, although they owed me £7k this time.

 

[MichaelW2]

The threshold for payment on account is £1000. Any more tax and you pay the following year ( estimated) in advance. If you can reduce it just below £1000, then no advance payments are required for following year. They do refund any payments if you adjust from just over to just under.

 

[newts]

I've just filled in my self assessment tax form online. My tax comes to about £2,600 but they want another £1,300 for 'payment on account'. The total amount that they have asked me to pay by the end of the year is about £3,900.

Do I have to make the £1,300 payment on account? As far as I can see this is a future payment for the next tax year. Can they penalise me if I don't pay it? I am reluctant to do so as most of my income comes from interest which is likely to be a lot less next year.

If your tax bill is £ 2,600 for the year to April 2025, you have pay £ 2, 600 on account for the following year. Usually £ 1,300 by January 31rst & the remaining £ 1,300 by July 31rst.

 

[markemark]

I regularly get my accountant to reduce the on account if I suspect the following year will be less tax paid. You need to show justification but over the many many years of trading it has been done more than once.

 

[icowden]

I've just filled in my self assessment tax form online. My tax comes to about £2,600 but they want another £1,300 for 'payment on account'. The total amount that they have asked me to pay by the end of the year is about £3,900.

Welcome to the depressing reality of self assessment. You not only have to pay your tax but also the tax they think you will need to pay for the year after, in two installments. I think it's supposed to help you avoid running up a debt with them.

As others have said, you can apply to reduce your payment on account if you have evidence that you are not likely to make the same profit - for example if you have closed the business or lost a major customer. At least by doing your return now, you have notice of what you need to pay. It's much worse if you leave it until January and then discover how much back payment you have to make!

 

[CXRAndy]

Over the coming years, filling in digital tax returns will capture almost everyone who works eventually

We've been already told we will need to start next year 😡

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

 

[alicat]

Welcome to the depressing reality of self assessment. You not only have to pay your tax but also the tax they think you will need to pay for the year after, in two installments. I think it's supposed to help you avoid running up a debt with them.

I think it's to provide a more level playing field with those in the PAYE system.

 

[icowden]

Over the coming years, filling in digital tax returns will capture almost everyone who works eventually

You mean there are still people who aren't doing their tax returns on line?

 

[Alex321]

Over the coming years, filling in digital tax returns will capture almost everyone who works eventually

We've been already told we will need to start next year 😡

https://www.gov.uk/government/publications/making-tax-digital/overview-of-making-tax-digital

There is no hint of any suggestion that PAYE may be phased out.

This means that any individuals or businesses that have to file ax returns will now have to do the digitally, using approved software