Self assessment ― payments on account

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Self assessment ― payments on account
  • Coronavirus (COVID-19) impact on 2019/20 payments on account
  • When are payments on account due?
  • How to calculate payments on account
  • Claims to reduce payments on account

Income tax is collected in a number of ways, including:

  1. collection at source throughout the year (eg via PAYE on earnings from employment)

  2. balancing payment for the tax year (tax liability less tax already paid) calculated on the tax return and due by 31 January after the end of the tax year

  3. payments on account calculated by reference to the tax due which has not been collected at source for the previous tax year (due by 31 January before the end of the tax year and the following 31 July)

Most UK taxpayers have all their income tax collected at source via their employers. Balancing payments and payments on account are dealt with via the self assessment system. Any taxpayer who believes they have a balancing payment to make in respect of a tax year must notify HMRC of their chargeability by 5 October following the end of the tax year. See the Notification of chargeability to income tax and capital gains tax guidance note.

Payments on account are interim payments of tax which apply to those self assessment taxpayers who have large amounts of tax payable at the end of the tax year because the tax collected at source does not cover the whole liability. This could be because the taxpayer has income which does not have tax collected at source (eg UK property income, bank interest or dividends). Alternatively, it could be because the amount collected at source does not cover the tax due on the income (eg a higher rate taxpayer in receipt of patent royalties).

This guidance note discusses when payments on account are due, how they are calculated and how they can be reduced if necessary.

Coronavirus (COVID-19) impact on 2019/20 payments on account

As per the guidance on the GOV.UK website, the second self assessment payment on account for the 2019/20 tax year is effectively deferred from 31 July 2020 to 31 January 2021. This means that the 2019/20 balancing payment due by

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