We are now just days away from the deadline for the Second Payment on Account for UK Self-Assessment taxpayers on 31 July 2023.
It is important that you are prepared to pay your outstanding balance by this date. However, if you haven’t had to before, here is what you need to know.
What is the Second Payment on Account?
In the UK, if you’re a Self-Assessment taxpayer and owe Income Tax of over £1,000 after subtracting your tax deductions and reliefs, you’ll typically need to make ‘Payments on Account’.
Payments on Account are advanced payments towards your next tax year’s liability. They’re calculated based on your previous year’s tax bill and are made in two instalments.
The first payment is due on January 31st, and the second payment is due on July 31st.
The Second Payment on Account is essentially the second half of your ‘Payments on Account’, as this system is designed to help spread the cost of the upcoming tax year and prevent large end-of-year tax bills.
How is the Second Payment on Account calculated?
Your Payments on Account (both first and second) are each typically 50% of your previous tax year’s liability. For instance, if your tax bill for the year 2022-2023 was £3,000, your Payments on Account for the tax year 2023-2024 would be £1,500 each (half of £3,000) – one payment in January the other in July.
Remember, Payments on Account do not include any Capital Gains Tax you owe or Student Loan repayments – these will be part of your ‘balancing payment’, which is due by January 31st following the end of the tax year.
What if my income varies?
If you anticipate that your income in the current tax year will be less than the previous year, resulting in a lower tax bill, you can apply to HM Revenue and Customs (HMRC) to reduce your Payments on Account.
This is done through your online tax account or by mailing form SA303 to HMRC.
Bear in mind, if you reduce your Payments on Account and it turns out your tax bill is higher than expected, you may face interest charges on the difference.
How to make the Second Payment on Account?
You can pay your Second Payment on Account in the same way you make your first payment, including through your online tax account, bank transfer, or cheque.
Ensure you leave enough time for your payment to reach HMRC by the July 31 deadline. Remember, you are responsible for making sure your payments arrive on time.
However, if you have any queries about making the payment or need additional time to pay, we can help and advise you. Please speak to our team today.
