Small business owners and taxpayers reminded of July tax payment deadline

Small business owners and other taxpayers are reminded of 31st July deadline for making Payments on Account towards their income tax bill.

Under the self assessment regime, taxpayers are normally expected to pay their tax bill by 31st January following the end of the tax year.
 

However, if your tax bill was over £1,000 and less than 80% of your tax has already been collected, you’ll also be expected to make two instalments for next year’s tax bill. These are called ‘Payments on Account’ and are due by midnight on 31st January following the tax year and the following 31st July.
 

New business owners

Once you’re used to filing tax returns, the impact on your cashflow of making Payments on Account in January and July will reduce- because the size of your payments should settle down.
 

But for new business owners or landlords for example, they can be a bit of a surprise in those first few years, especially if they’ve been employed and used to paying their taxes regularly at source through PAYE.
 

Jo Nockels, Senior Training & Communications Manager, has some advice for taxpayers: “try to make sure that you put aside 25% of your profits for your tax bill. It might not cover it all or that might be too much; but at least it should avoid any nasty surprises. If you think you might be a higher rate taxpayer, we’d recommend you put aside around a third of your profits for your tax bill.”
 

Reduce your Payments on Account

Your Payments on Account are estimated and they will be based on last year’s tax bill. If you think your profits are down and that your tax bill is going to be lower than last year, you can ask HM Revenue & Customs to reduce your payments on account. You can do this online or using a form, and an accountant could do it for you.
 

“If you do decide to alter your Payments on Account, try to be as accurate as possible. If you pay too much, you’ll of course be in credit and could get a refund, but it’s best to have the money in your account; rather than HMRC’s. If you under pay, then you’ll have to find a larger amount in January and you’ll have interest to pay”, warns Jo.
 

If you have questions surrounding a Payment on Account you’re due to make this July, speak with your local TaxAssist Accountant. They can discuss with you what your options are and whether you have the opportunity to reduce your July instalment.