As a self-employed worker, or a worker who has untaxed income you may be expected to make two ‘payments on account’ every year. The first one due by midnight on 31 January and the second by midnight on 31 July.
Missing these deadlines will see HMRC charge interest on the amount owed. This interest is always 2.5% higher than the Bank of England base rate. The rate can increase, if, as forecast, the base rates rise next month.
“It’s so important to make sure you pay your tax bills on time, ” stresses our Partner and Tax expert, Matthew Grief, “Risking multiple fines just isn’t worth it. Especially in this current financial climate, making sure you’re organised and having the payments settled can make such a big difference” he continues.
The payments are split in half, for example if you were liable to a total tax charge of £5,000 in 2021/22, you would make two separate payments of £2,500, in January and July. Where payments on account do not cover the full tax liability, HMRC will expect you to pay a final balancing payment by 31 January the following year.
If the payments on account made are greater than your final tax liability, HMRC will issue a refund once your tax return has been filed. If you know you will be earning less money in a tax year, a claim can be made to reduce these; this can be done either online or by sending form
SA303 to HMRC.
You won’t be required to make a payment if either of the following applies:
- Your previous self-assessment tax bill was under £1,000
- You have already paid over 80% of the tax you owe at source
If you miss your income tax payment deadline, you will also be charged a 5% surcharge penalty by HMRC on any paid tax still unpaid 30 days after the due date. Further penalties will be charged where tax remains outstanding six months and 12 months later. View all the different ways to pay on the
gov.uk website.
It’s important to be aware that workers who don’t pay income tax via their employer’s payroll will be at risk of deadlines and fines for missing payments, compared to employees taxed under PAYE.
You must file your tax return every year by midnight on 31 January, or October 31 if you prefer to file a paper return. If you miss either deadline you will incur an automatic £100 late filing penalty. That is increased to £10 a day up to 90 days after three months (up to a maximum of £900). A penalty being the higher of £300 or 5% of the tax due is applied where a return is 6 months late and the same penalty will apply again where 12 months late. Any mistakes on your self-assessment form can also see you fined.