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
 
Kim Clayden
13th April 2018 Making Tax Digital Seminar Two – St Ives

       Our second MTD seminar was in St Ives at the Slepe Hall Hotel on Thursday 12th April. Which was a much more convivial venue. A smaller group meant more personal conversations with our clients and we were able to give a number of clients the time they needed to fully understand the next steps for…

Read More »

Daniel Coleman
11th April 2018 Making Tax Digital ‘Roadshow’ – Huntingdon

We have begun the first of eight seminars discussing the preparation needed for making tax digital. Our first seminar kicked off in Huntingdon at the Marriott hotel and was a great success. With around 30 people attending we explained to clients what making tax digital was, how it was going to effect them and more…

Read More »

Paul Jefferson
5th April 2018 Reclaiming VAT: Checking the validity of your supplier invoices.

  VAT registered businesses will be aware that they can only reclaim VAT on business purchases if they have a valid VAT invoice.   For supplies over £250, this invoice should disclose: Supplier: sales invoice unique sequential invoice number, name, address and VAT number. Date and tax point, if different Your name and address Description…

Read More »

Scott Butcher
5th April 2018 Deadline Approaching for ATED forms

  If you have a residential property which is worth more than £500,000 and is held in a company then you will be required to complete an Annual Tax on Residential Dwellings (ATED) form. The deadline is fast approaching with all ATED forms for 2018 to 2019 tax year being due for filing by 30th…

Read More »

Vanessa Pearson
5th April 2018 HMRC loses IR35 case

  A contractor in the construction industry, Mark Daniels, has won his appeal against HMRC. In MDCM Ltd v Revenue & Customs, HMRC were defending their decision that a contract between Mr Daniels’ personal service company MDMC Ltd and recruitment agency Solutions, which provided his services to Structure Tone Ltd,  should have been caught by…

Read More »

Richard Alecock
5th April 2018 Top mistakes tax payers make when completing their tax returns.

  Making mistakes on self assessment tax returns however innocent can lead to enquiries, investigations and additional tax, interest and penalties. Below are some of the top mistakes many people make: Forgetting to include income from a previous employment that ended part way through a tax year. Forgetting to include benefits from a previous employment…

Read More »