Self-assessment taxpayers typically need to pay their Income Tax liabilities in three instalments each year. Understanding the payment schedule and options for adjusting payments can help manage your tax obligations effectively.
Payment Schedule
The first two payments on account are due by 31 January during the tax year and by 31 July after the tax year ends. Each payment on account is based on 50% of the previous year’s net Income Tax liability. Additionally, the third (or balancing) payment is due on 31 January after the tax year ends.
Reducing Payments on Account
If you expect your income for the following tax year to be lower than the previous year, you can apply to reduce your payments on account. You can do this through HMRC’s online service or by submitting form SA303. This adjustment helps manage cash flow and avoid overpaying taxes.
Exemptions from Payments on Account
You do not need to make payments on account if your net Income Tax liability for the previous year is less than £1,000. Additionally, if more than 80% of your tax liability was collected at source, you are exempt from making these payments. These exemptions can simplify your tax payments and reduce financial strain.
Adjusting Payments on Account
There is no limit on the number of times you can apply to adjust your payments on account. If your liability for 2024-25 is lower than for 2023-24, you can request HMRC to reduce your payments. The deadline to submit a claim to reduce your payments on account for 2024-25 is 31 January 2026. This flexibility allows you to respond to changes in your financial situation.
Increased Taxable Profits
If your taxable profits have increased, there is no obligation to inform HMRC immediately. However, your final balancing payment will usually be higher. Planning for this can help avoid unexpected tax bills.
Summary
In summary, self-assessment taxpayers must pay Income Tax liabilities in three instalments each year. The first two payments are due by 31 January and 31 July, with a balancing payment due on 31 January after the tax year ends. You can apply to reduce payments if your income is lower, and certain exemptions apply. Adjusting payments on account is flexible, and understanding these options helps manage your tax obligations effectively.
