15 Apr Payments On Account – Who Needs To Pay And How Are They Calculated?
The self-assessment tax return and payment filing deadline of 31 January is fast approaching. Many people will have to pay their second payment on account by this date, and those who have not paid before will have to pay for their first one. If you do not know what a payment on account is, or how it gets calculated, do not worry. In this article, we will discuss payments on account – who needs to pay and how are they calculated?
What Is a Payment on Account?
A payment on account is an advance payment made towards next years tax bill. HMRC, calculate the payments based on your previous tax year. They then ask you to pay half of this amount by 31 January, and the other half by 31 July.
Who Needs to Pay?
You must make payments on account if you owe more than 1,000 U. S. Dollars in tax after all deductions at the end of the previous tax year. You also have to pay if you paid less than 80% of your last tax bill through PAYE coding notices or Self Assessment payments at the end of the last tax year.
Not only that, but you will only have to make payments on account if you are required to pay more than 1,000 U. S. Dollars in income tax when you file, and they are not mandatory. Furthermore, you can see whether HMRC requires you to make payments on account by looking at your end-of-year statement form SA302. If it says payments on account required, then you must pay them; otherwise, it is up to you whether you want to do it.
How Are They Calculated?
Payments on account are advance payments towards your annual tax bill. They get calculated as half of the previous years tax bill (or 100% if you have previously paid over 90% of your total tax liability), and they must be paid by 31st January and 31st July.
The money you pay in advance will count towards your final tax bill for that year. If you have overpaid, HMRC will refund you the difference at the end of the tax year.