Self-Assessment Tax Prepayment Info

It’s July, notable for day-long sunshine, high temperatures and tax payments!

Sadly only one of those seems to apply to the UK this year, and it’s not the beautiful summery weather…

The 31st July marks the final date for your tax prepayment if you are self employed and submit a self-assessment return.

There are two exceptions to this rule; if your last self-assessment tax bill was £1,000 or less, or, you have already paid more than 80% of your outstanding tax bill.

Otherwise, you are required to make two tax payments, one on the 31st of July, the other on the 31st of January.

However, since this is HMRC we’re dealing with it’s not entirely straightforward, so we’ll quote directly from their guidance:

“Each payment is half your previous year’s tax bill. Payments are usually due by midnight on 31 January and 31 July.

So far, so good.

However, if you still have tax to pay after you’ve made your payments on account, you must make a ‘balancing payment’ by midnight on 31 January next year.

Example

Your bill for the 2022 to 2023 tax year is £3,000. You made 2 payments of £900 each (£1,800 in total) on account towards this bill in 2023.

The total tax to pay by midnight on 31 January 2024 is £2,700. This includes:

• Your ‘balancing payment’ of £1,200 for the 2022 to 2023 tax year (£3,000 minus £1,800)

• The first payment on account of £1,500 (half your 2022 to 2023 tax bill) towards your 2023 to 2024 tax bill

You then make a second payment on account of £1,500 on 31 July 2024.

If your tax bill for the 2023 to 2024 tax year is more than £3,000 (the total of your 2 payments on account), you’ll need to make a ‘balancing payment’ by 31 January 2025.”

There you go - simples!

In truth it’s not too confusing, however it’s obviously important to get it right rather than risking late payment fees and interest charges. Therefore if you are unclear about what exactly is required from you, give us a call and we can help you work it all out.