Blog.
Accounts made easy.
What are they and why do you have to pay payments on account?
If your Self Assessment tax bill exceeds £1000 then HMRC will in fact ask you to pay in advance for your next tax bill. These payments will be expected on 31st January of the current tax year,
for example;-
Your tax bill for 2020/21 is £4000.
You will be expected to pay on 31st January 2022 £4000 for your current tax bill AND £2000 for next years tax bill (2021/22) followed by a second payment of £2000 on 31st July 2022. Thus making your tax bill far more than expected.
However these payments will in fact mean your tax is paid in advance.
You can always check what payments have been made and what are expected on your governement gateway account. If payments are aren't made then interest will incur on those late payments, so definitely worth checking on your gateway for those.
If you already know your tax bill will be reduced in the following year you can reduce those payments on account but be warned, if your tax bill exceeds the reduced amount interest will be added!
If you tax bill is less the following year, you can request a refund of the overpayment.
