‘Payments on account’ are advance payments towards your tax bill.
You have to make 2 payments on account every year unless your tax bill is under £1,000 or you have 80% of your tax collected through PAYE.
Each payment is 50% of your previous year’s tax bill. Payments are due by 31 January and 31 July.
Example:
You are entering the 'payments on account' system for the first time.
Your tax bill for the 2021-22 tax year is £4,000. You would need to pay £4,000 to HMRC by 31 January 2023, and the 1st payment on account for the 2022-23 tax year of £2,000 would also be due by 31 January 2023.
Total payment due 31 January 2023 = £6,000 (£4,000 + £2,000).
The 2nd payment on account of £2,000 would be due 31 July 2021.
When we prepare your 2022-23 tax return, we will then know your actual 2022-23 tax bill.
If your 2022-23 tax bill is higher than £4,000, then you pay a balancing tax payment by 31 January 2024 or if your 2022-23 tax bill is lower, HMRC will issue a refund straight away on submission of your tax return.
