Your self assessment tax return and any tax liability is due by the 31st January following the end of the previous tax year, which is the 5 April the year before.
You will have to make payments on account if you submit a tax return and your tax liability is more than £1,000 with less than 80% of this being deducted at source.
Profits change every year, but payments on account are there to be as accurate as possible.
This means that you’ll pay 50% of your previous tax bill on the 31st January and then again on the 31st July helping you keep on top of your tax liabilities so that you don’t have large amounts of unpaid tax due to HMRC at any one time.
Then the following January you might have paid slightly too little tax on account in the previous january and july and therefore you need to catch up the difference.
You have paid too much tax and you will get a refund from HMRC.
Let’s say your previous tax bill was £3,000, you would pay the first payment on account on 31st January of 50% of this – £1,500 and the other £1,500 on the 31st July with any more tax being finalised on the 31st January the next year through a top up or refund.
Want to know what you should be paying when? Speak to Artema to find out.