Are you ready for your end-of-July tax payment on account?

The 31 July deadline is almost here. If you’re self-employed or pay tax through Self Assessment, this is the time to check you’re ready to make your second payment on account.

Miss it, and HMRC will start charging interest from 1 August.

What’s a payment on account?

Payments on account are advance payments towards your tax bill for the current year.
They’re made twice a year – in January and July – and are based on the amount of tax you paid last year.

Most people who are self-employed or have untaxed income will be required to make these payments, helping to spread the cost of their tax bill over the year.

Who needs to pay?

How much will I owe?

In most cases, your second payment on account will be the same amount as your first payment, which you made by 31 January.

Here’s how it works:

– HMRC takes your previous year’s tax bill

– Splits it into two equal instalments

– These are paid in January and July

For example, if your last tax bill was £4,000, you’ll have paid £2,000 in January and now owe another £2,000 by 31 July.

You can check the exact figure by logging into your HMRC account and looking under the Self Assessment section. There, you’ll also find your payment reference number, which you’ll need when paying.

What if I’ve had a drop in income?

If your income this year is lower than last year, you can ask to reduce your payments on account to reflect that change.

This might apply if you’ve:

– Earned less due to time off or reduced hours

– Closed part of your business

– Lost clients or income streams

– Had a downturn in profits

You’ll need to make a formal request to HMRC using:

– Form SA303, or

– The “reduce payments on account” option in your online Self Assessment account

But don’t reduce the amount too far. If you end up owing more than you’ve paid, HMRC will charge interest on the shortfall – and may apply penalties.

If you’re unsure how much to reduce by, check with your accountant before making the change.

How do I pay?

HMRC accepts several payment methods – but whichever one you choose, make sure the payment clears by 31 July.

You can pay using:

– Online or mobile banking – use HMRC’s details and your 10-digit UTR with K on the end as the reference

– Debit card on the HMRC website

– Debit card on the HMRC website

Direct debit – only if set up in advance

Be aware that payments from some banks can take up to three working days to clear, especially if made over a weekend or bank holiday.

What if I miss the deadline?

If you miss the 31 July payment deadline, interest will be charged from 1 August.

If you delay further, you may face:

– Additional penalties

– Trouble managing future payments, including the January balancing payment

– Cash flow pressure as tax debts build up

If you’re likely to miss the deadline, don’t ignore it. Speak to HMRC or your accountant straight away – there may be options to set up a Time to Pay arrangement.

How your accountant can help

We can take the pressure off by helping you:

– Check your payments on account are correct

– Reduce them safely if your income has dropped

– Pay HMRC on time and avoid penalties

– Stay ahead of any changes or upcoming payments

If you’re unsure what you owe or you think your circumstances have changed, now’s the time to get it sorted.