Self Assessment | Richmond
Dividends, Bonuses and the January Shock: How Richmond's Higher Earners Tame Payments on Account
Richmond's Self-Assessment profile is distinctive: directors paying themselves in dividends, portfolios throwing off investment income, trail bonuses and partnership profits. None of it is taxed at source the way salary is, so the bills arrive through the return, and with them the system everyone hates on first contact: payments on account.
Why your January bill is 150 per cent
Once your Self-Assessment liability passes the threshold (and under 80 per cent of your tax is collected at source), HMRC asks for next year in advance: half on 31 January with the balance, half on 31 July. The first year this bites, January effectively costs one-and-a-half years of tax. It is not a penalty; it is prepayment, credited next year, but the cash-flow shock is real.
Taming it
- File early, pay late. A return filed in May fixes January's number eight months ahead; the deadline for paying never moves earlier.
- Reduce when income genuinely falls. Dividends cut, portfolio repositioned, bonus structure changed: a reduction claim trims the advance payments to match. Over-optimistic claims attract interest backdated, so we reduce on evidence.
- Dividend timing. Directors who control their dividend dates can smooth liabilities across years instead of stacking them; the same profit, calmer instalments.
- The savings discipline: a fixed percentage of every dividend and bonus into a tax pot makes every deadline a non-event. We set the percentage per client.
The first-year shock, defused
A Richmond consultant moving from PAYE to a director-dividend structure faced a first January of £19,400: the year's bill plus the first advance instalment. Filing in May gave eight months' warning, a justified reduction (his second year's dividends were deliberately lower) trimmed the instalments, and the monthly pot covered the rest. The following January cost him an email.
Local service: Self Assessment accountant in Richmond. Full mechanics: payments on account explained.
Frequently Asked Questions
Dividend allowance is tiny now. Does every dividend need a return?
Beyond the allowance, dividend income needs declaring; directors and serious investors are almost always in Self-Assessment territory.
Do ISAs help with any of this?
Entirely: ISA income and gains are outside tax and outside the return. Maximising ISA wrappers is the simplest payments-on-account therapy there is.
My platform withholds nothing on fund income. Normal?
Yes, UK dividends and most fund distributions arrive gross; the tax flows through your return, which is exactly what feeds the instalments.
Capital gains from rebalancing: do they affect payments on account?
CGT is settled with the January balance but does not enter the payments-on-account calculation, a quirk that softens rebalancing years slightly.
I reduced my instalments and income then recovered. What happens?
Interest runs on the shortfall from the original due dates. Reduce on genuine evidence, not hope; we model before claiming.
Is July's instalment ever skippable?
If the new return is filed before 31 July showing a lower liability, the July payment adjusts to the true figure. Another argument for early filing.
Trust and estate income arrives with odd tax credits. Handled how?
Through the return with credit for tax the trust paid; the netting frequently surprises people in a good way. Bring the R185s.
What does your service cost against the saving?
Fixed fee, quoted up front. For most Richmond clients the first year's instalment-planning alone covers it, before the deduction work starts.
Dreading the lumpy January?
Free 15-minute call: instalment forecast, reduction check, and the pot percentage that makes deadlines boring.
Or email info@yourtaxhelp.co.uk | Self Assessment accountant in Richmond
General guidance only. Not personal tax advice. Contact us for advice specific to your situation. Figures relate to the 2025/26 tax year unless otherwise stated.