Overview of Payment on Account
HMRC Payments on account are the advance payments of tax bills against your self-assessment tax dues (also includes class 4 National Insurance for self-employed).
The due amount, if applicable is done and calculated twice a year and it is required to be paid by all individuals (if meets the criteria by HMRC). You can follow the details below when it is required to make payment to payment on account to HMRC.
All you need to know about payments on account due to HMRC
A person is required to make payment on account, if:
(a) Previous self-assessment tax dues were £1,000 or more.
(b) Payment of tax dues for the current year is less than 80%. It includes tax deduction bank on interest and tax payments through the tax code.
Two counts of payments on account amounting to each 50% of the previous year’s self-assessment tax bill, payable on 31st January and 31st July correspondingly.
If, the total of both the payments on accounts at HMRC is less than the self-assessment of the current year, then balancing payment must be done to HMRC by 31st January of the following year.
There are many ways to make payment of taxes, Like:
(a) By online bank account,
(b) Online and telebanking,
(c) Online by debit or corporate credit cards,
(d) At your bank or building society,
(e) Direct debit,
(f) By sending cheques by post, etc.
When payment reference is required during the payment on account at HMRC, use your UTR followed by K.
By signing on to the HMRC online account, you can view the tax bill and payment statements year-wise. There you will find the payments made on account and payments on account due for the next self-assessment bill.
Example of Payment of Account
The self-Assessment tax bill for the years 2020-21 is £5,000. Two payments have been done on account of the previous year of £1,800 each (A total of £3,600).
Tax payment to be made by 31st January 2022:
- Balancing payment of £1,400 (5,000-3,600),
- First payment on account £2,500 (50% of 5,000) for year 2022-23,
Totalling £3,900.
Then, on 31st July 2022, the second payment on account for 2022-23 has to be made amounting to £2,500 (50% of 5,000).
Similarly, we can check by comparing the self-assessment tax bill for 2021-22 with the payments on account, whether we have to make a balancing payment on 31st January 2023 or not.
For more detailed information, you can click here to read official content from HMRC.
Most frequent questions and answers
No, the tax bill for capital gains and student loans has to be paid by balancing payments.
If it’s known that the tax bill will be less than the previous year’s tax bill, we can reduce the payments on account by requesting HMRC either online or by post. You can also refer to our guide using an online option.
If on account payments for the year are more than the tax bill, we can ask HMRC for a refund of overpaid Tax.
If on-account payments for the year are less than the tax bill, HMRC will charge interest.