Payments on account catch out almost every new self-employed person, effectively paying next year's tax in advance. We explain them, check they are correct, and reduce them where your income has dropped.
Payments on Account
If your Self Assessment bill is more than £1,000, HMRC asks you to make two payments on account toward the following year's tax, each equal to half of your latest bill, due on 31 January and 31 July. In your first year this can mean paying around 150 per cent of your bill at once, which is a nasty shock. If your income falls, the payments can be reduced.
Your Tax Help Accountants explains exactly what your payments on account are and when they are due, checks they are correctly calculated, and applies to reduce them where your income has genuinely fallen, so you are not overpaying and holding money with HMRC unnecessarily. We plan your cash flow so January and July never catch you out.
In your first year, payments on account mean paying your tax plus half of it again toward next year, all at once, so a first January bill can feel enormous. Understanding this in advance, and reducing the payments if your income has fallen, keeps cash flow under control.
The Detail That Matters
Payments on account catch out almost every newly self-employed person: HMRC makes you pay towards next year's tax in advance, so a first bill can be around 150% of the tax actually due. Understanding, and where possible reducing, them is essential.
If your Self Assessment bill exceeds £1,000, HMRC requires two payments on account towards the following year, each equal to half your latest bill, due on 31 January and 31 July. They are simply tax paid in advance, not extra tax.
In your first year you pay the actual bill plus the first payment on account together in January, roughly 150% of the bill at once, which is a real cash-flow jolt if you are not expecting it.
If your income has genuinely dropped, you can apply to reduce your payments on account so you are not overpaying and tying up cash. Reduce them too far, though, and HMRC charges interest, so the figure must be right.
We forecast your January and July payments so they never surprise you, and reduce them where your circumstances justify it, keeping your cash flow under control.
The first-year jolt, paying your bill plus half of it again in one January, catches almost everyone, and many overpay because their payments on account are still based on a higher previous year.
Key Figures
How We Help
We explain your payments on account clearly, the two instalments toward next year's tax, and exactly when each is due.
If your income has fallen, we apply to reduce your payments on account so you are not overpaying and tying up cash with HMRC.
We forecast your January and July payments so they never come as a surprise and you can plan for them.
All the forms, calculations and correspondence handled on your behalf, so you never have to decode HMRC's rules or sit on hold.
A clear fixed fee quoted after a free call, your position explained in plain English, and never a surprise bill.
We act quickly, and where earlier years are involved we put those right too, reclaiming refunds or minimising penalties.
The first-year payment-on-account shock, paying around 150 per cent of your bill at once, catches almost everyone. Explaining it in advance and reducing payments where income has dropped keeps it manageable, which we handle.
Recent Client Outcome
A self-employed client's income had fallen, but their payments on account were still based on the previous, higher year, tying up cash they needed.
What we did. We calculated their genuinely lower expected income and applied to HMRC to reduce their payments on account to match, being careful not to under-state and trigger interest.
The outcome. The reduced payments freed up cash flow immediately, and because the reduction was accurate, no interest charge arose.
Explaining the system and adjusting the payments to their real income turned a cash-flow strain into a manageable position.
Why People Come to Us
Questions Answered
Want us to handle this for you, end to end?
See our Self-Assessment Accountant →Free fifteen-minute call. Fixed quote within twenty-four hours. Your return filed, every expense claimed, your bill explained, and salon VAT, payroll and accounts handled if you own a salon. Same accountant, start to finish.
Or email info@yourtaxhelp.co.uk, we typically respond within two business hours.
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