Understanding Payments on Account

21st March 2018

 

Payments on Account (POA) tend to cause confusion for individuals submitting a Self Assessment Tax Return and may result in cash flow issues for some taxpayers. POA are payments which HMRC require in advance for the current tax year, based on the liability in the previous year.

You will have to make POA if you meet both of the following criteria:

  • Your Self Assessment tax bill is greater than £1,000

AND

  • Less than 80% of your income tax liability is deducted at source (through PAYE)

Those who fall into POA will have to make two payments; one on 31 January and the other on 31 July. Each POA is half of the prior tax year’s income tax and any Class 4 NIC liability (but not your Class 2 liability).

Any balance remaining after deducting the POA already made will be due by 31 January following the end of the tax year. For example, in January 2019 and July 2019 individuals will be making payments on account for their 2018/19 tax liability, with any balance payable by 31 January 2020.

As your POA are based on your prior year’s tax and Class 4 National Insurance liability, you may sometimes over-pay tax through your POA if your liability fluctuates. If you are certain that your taxable income is going to decrease in the following tax year, then we can request to reduce your payments on account through your tax return, a form SA303 or through HMRC’s online system.  However, please be aware that if your payments on account are over-reduced, then HMRC will charge interest on the underpaid tax.

For further information, please speak to your usual contact at Whiting and Partners or visit https://www.gov.uk/understand-self-assessment-bill/payments-on-account

Other items in Blogs
Ruth Pearson
23rd June 2022 Changes to National Insurance

In April 2022 we saw Employee’s National Insurance Contributions increase by 1.25% from 12% to 13.25%, as part of the Governments Health and Social Care levy. Employer’s National insurance also increased from 13.8% to 15%. From April 2023, the health and social care levy will be paid separately to National Insurance and become a tax…

James Selby
23rd June 2022 Pensions Contributions: Maximise tax relief

We are seeing more and more cases of individuals missing out on claiming higher rate tax relief on their employee pension contributions especially where they are not in self-assessment and required to file tax returns.   Where employers have enrolled their staff to make employees pension contributions via a ‘relief at source’ scheme, the contributions…

Paul Jefferson
14th June 2022 VAT Penalty Changes

A new penalty regime will come into effect for VAT periods starting on or after 1 January 2023. The changes will impact the charges for missing VAT filing and payment deadlines and will be replacing the current surcharge system. These changes place continued importance on being up to date with your VAT returns, aware of…

Liz Simpson
13th June 2022 NIC: All Change!

HMRC Changes to the National Insurance contributions for 2022-2023 tax year, are you confused? Due to the COVID-19 strain on the NHS, the government announced that they would be increasing the National Insurance contributions by 1.25% as a means to increase spending on health and social care. The Health and Social Care Levy was applied…

Jaimie King
10th June 2022 30-Jun-22: Covid Recovery loan deadline approaching

Time is running out for businesses to apply for Recovery Loans, the follow on Covid-support product from the CBILS.   In order to qualify for the Recovery Loan Scheme (RLS), your business has to have been affected by Covid-19 and you have to apply and have received the funds by 30th June 2022. The RLS…

Stephen Malkin
7th June 2022 Virtual Finance Officer: Outsource your book-keeping to us

Following the increase in use of cloud accounting software’s like Xero, QuickBooks and Sage over the past few years, businesses have never been better positioned to look to outsource their accounting function.  For all businesses, getting the accounting function working efficiently can be challenging, as you will need potentially different people with different skills: someone…