Second Payment on Account due on 31 July – don’t forget!
If you are already in the self-assessment tax system (i.e. this is not your first self-assessment tax year) then you may be due to pay your second payment on account for the year ended 5 April 2017 by 31 July 2017. However you may not need to pay it at all, or indeed any of it, if your tax liability for 2016/17 is less than it was the previous year. We explain further.
‘Payments on account’ are payments made towards your following year’s income tax and class 4 National Insurance contributions (NIC). There are two payment dates – 31 January and 31 July. Each payment is half of the amount due for the previous year. You can find more information on payments on account on our website.
Be aware that if the 2016/17 tax year is your first year in the self-assessment tax system (and you must be registered with HMRC for self assessment by 5 October 2017!) then you will not have to pay the tax you owe until the 31 January 2018 deadline, after which point you might need to start making payments on account.
How can I reduce my payments on account?
- You think your tax bill is less for 2016/17 than 2015/16 because you had les self-employed income, for example; or
- You know you owe less this year than last year having already done your tax return for 2015/16
then it is possible to ask HMRC to reduce your payments on account (for 2016/17 payments on account, you can do this until 31 January 2018).
You need a reasonable estimate of the amount you owe in order to reduce your payments on account. If it turns out that you have reduced them too much, you could face interest charges and even a penalty if the claim was fraudulent or negligent. The best way to make sure that this does not happen is to be certain of your figures, by filing your tax return. You can find more information to help you do this on our website.
Any reduction will be applied to both payments. This could mean that you paid too much in January – that extra amount can help to cover the reduced July payment, or mean you have nothing to pay.
Peter filled in his tax return for 2015/16 and his tax liability for that year meant he was due to make payments on account of £700 on 31 January and 31 July 2017 – so £1,400 in total.
Peter has worked out that his self-employed business has not done as well for 2016/17 and he estimates that he will owe only £800 total in tax and class 4 National Insurance contributions for that year.
Peter therefore claims to reduce his 31 January and 31 July 2017 payments on account to £400 each. Because he already paid £700 on 31 January 2017, he only owes £100 on 31 July.
You can reduce your payments on account by filling in a SA303 form or, if you file your tax return online, by logging into your HMRC online services account and clicking ‘Reduce my payments on account’. You can find the form, and link to online services via GOV.UK.
You must tell HMRC if you want to reduce your payments on account. If you simply pay a lower amount to HMRC, this will show on their systems that you have not paid enough and it is likely that they will contact you and you could be liable to pay a fine.