Financial Matters with Fairhurst Accountants: everything you need to know about self-assessment tax payments

If you are new to being self-employed or being a landlord, self assessment can feel like one of those jobs you know you should understand better, but never quite get around to.

When do you actually pay the tax? Why does January seem to be so expensive? And what on earth is a “payment on account”?

In this article, we’ll walk you through how self assessment tax payments work in practice, the key dates to watch and how to avoid nasty surprises by planning ahead.

Once your tax return is completed and filed, HM Revenue & Customs (HMRC) calculates how much tax you owe on all income you have earned outside of PAYE.

Unlike tax taken automatically from a salary, you are responsible for paying the tax yourself. That is why knowing the deadlines is crucial.

For most people, there are two main types of payments to make each year:

Payment on account - This is essentially a prepayment for your next year’s tax. If your tax bill for a year is over £1,000, HMRC will require you to make two equal payments on January 31 and July 31. Think of it like a deposit on your tax bill.

Balancing payment - This is the top-up for anything left over once your tax return is finalised and submitted. It’s due by January 31 following the end of the tax year.

If you are new to self assessment, then you probably will not have made any payments on account for the first tax year that you file a tax return for.

So, you will need to pay the full balance for the entire tax year on January 31 following the tax year end.

These days most people pay online through their HMRC account by bank transfer or by debit card.

You can also use the HMRC app to pay your bill through your bank’s app or by using online banking.

You just need the reference numbers to make sure the money goes to the right place.

Late or missing payments can lead to penalties and interest charges, so planning ahead is essential.

If you need help completing your tax return or want advice on paying tax, please contact your local accountant.