Second HMRC Payment on Account Due by End of July
UK's Self-Employed Urged Not to Forget July 31st Deadline for Second Payment on Account to HMRC
With 15% of the working UK population now self-employed, using the Self Assessment system to pay tax is an increasingly common method of paying your tax bill. However, newcomers to the Self Assessment system may be unaware that they are expected to make twice yearly ‘payments on account' to their Self Assessment tax account, with the next deadline at the end of July. Tax preparation specialist David Redfern, director of DSR Tax Claims Ltd, explained what these payments on account are, whether you are affected by them and whether you will need to make a payment on account by July 31st.
Taxpayers who are responsible for settling their own tax bill, rather than being taxed by an employer or pension provider through PAYE, are required to use HMRC's Self Assessment system to calculate and settle their annual tax bill. Redfern explained, "It's not just those who are self-employed who are expected to register for Self Assessment and submit an annual tax return - you may also be required to submit a Self Assessment tax return if you are employed but have additional earnings, perhaps through rental property or a business you run outside your main PAYE employment. Similarly, if you wish to claim tax relief on expenses of more than £2,500 in any tax year, you need to do this by completing and submitting a tax return". Self Assessment tax returns must be submitted by the end of January 31stfollowing the tax year in which the tax information within relates to.
Where taxpayers owe tax to HMRC, they are expected to make two payments on account to HMRC as an advance payment towards any tax they may owe in the forthcoming tax year. The first is due on January 31stin line with the Self Assessment submission deadline. However a second payment is due on July 31stand this deadline now looms for taxpayers who are responsible for settling their own tax bill. Redfern stated, "It would be pretty hard to miss the January 31stdeadline because it gets so much media coverage but the July 31stpayment on account deadline is often forgotten about due to it receiving far less attention. Those who have been taking care of their taxes for years will be familiar with the Self Assessment calendar, but for newcomers to Self Assessment this July deadline is often easily missed. If you have tax to pay from the tax year 2018/19 and you have not yet settled that tax bill in full, you will need to make a payment on account to HMRC".
Recent years have seen the payments on account system hit by numerous technical issues, with this tax year being no different. Concerns have been raised that HMRC have not sent payment reminders, leading to fears that some taxpayers may not be aware that they are required to make a payment on account by the end of the month. Redfern stated, "If you know you had no tax to pay in 2018/19 then you could request that HMRC reduce their payment on account demand to reflect your current tax position. However, those unfamiliar with Self Assessment may rely on HMRC to inform them when payments are due. Due to a technical error in January where taxpayers weren't notified that they were required to make a payment on account, those who didn't rectify this error in January by contacting HMRC won't receive any form of reminder meaning that they will face interest charges on unpaid tax".
Additionally, Redfern added that many of those new to the Self Assessment system find payments on account confusing, adding, "As self-employment, contracting and freelancing become more popular as employment options, more taxpayers are being dragged into Self Assessment. Many don't realise that as well as settling their tax bill for the previous tax year, they also need to be thinking about their payments on account for the current tax year prior to the Self Assessment deadline for that tax year. Even where you have closed your business, until your tax bill is completely settled you are still required to make payments on account or risk an interest charge". He called for more awareness of tax issues for the self-employed and small businesses. Taxpayers who are unaware of whether they need to make a payment on account are encouraged to log into their HMRC Self Assessment account.
Image courtesy of Maddi Bazzocco
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