It's deadline day! This means all those deadline dancers who still have to submit their tax return to HMRC will be rushing to do so.
Not only is 31st January the deadline for submitting your self assessment tax return, it's also the deadline for paying any tax due for the 2022-2023 tax year.
People who go over £1,000 tax due for the first time often get a surprise when they are also asked to pay a payment on account for the 2023/2024 tax year by 31 January with a further payment on account due 31 July.
But what are payments on account?
When you are self-employed or receive untaxed income, HMRC may require you to make payments on account towards your future tax bill. These payments act as an advance payment for your tax liability and help you spread the cost over the year. They are calculated based on your previous year's tax bill.
Who needs to make payments on account?
If your tax bill exceeds £1,000 and less than 80% of your tax liability is covered through tax deductions at source (e.g., through PAYE), you're likely to be required to make payments on account. The first time you're required to make a payment on account can come as a shock as you effectively need to pay 150% of your tax bill in one go so it's essential to understand your individual tax situation and consult with a professional bookkeeper to ensure compliance.
At A B C S UK we always recommend that our clients file their tax returns as early as possible as filing your tax return early offers several advantages including providing a clear picture of your tax liability, allowing you to plan and budget effectively.
Early filing also minimizes the risk of penalties for late submission and gives you peace of mind, knowing that your tax obligations are taken care of.
If you'd like to speak to us about how we can support you with any aspect of bookkeeping and accountancy, you can contact us by email at: info@abcsuk.co.uk