Confusion over 31 July tax payments
The second Self Assessment payment on account for 2018/19 is due by 31 July 2019. But what should you do if you think you are due to make a payment but you don’t receive a statement of account from HMRC advising you what to pay this year?
Many people who pay their tax under Self Assessment need to make a tax payment by 31 July each year, being the second instalment payment (or ‘payment on account’) towards their tax bill for the tax year which ended on the previous 5 April.
So for the 2018/19 tax year which ended on 5 April 2019, the second payment on account is due on 31 July 2019. The first payment on account would have been due on 31 January 2019.
What is different this year?
There has been a glitch in HMRC’s computer systems which is causing confusion about this year’s payments on account.
When 2017/18 tax returns were processed by HMRC, payments on account due for 2018/19 were not automatically set up on everyone’s file. If you are affected, you will not receive the usual statement of account from HMRC to tell you how much you should pay by 31 July as their records will not show that you owe them anything by that date. In fact, HMRC’s records may show that you have currently paid too much if you paid the first payment on account for 2018/19 (due by 31 January 2019) but 2018/19 payments on account were not created on your tax file due to this computer issue.
So, what do I do if I do not receive a statement of account showing my 31 July tax payment?
First, do not assume that if you do not receive a statement of account from HMRC that you are affected by this computer glitch. If HMRC are expecting a payment on account by 31 July and you do not pay it on time, you will be charged late payment interest.
If you are not sure whether you need to make a payment or not, you should check with HMRC. You may be able to check your payment on account position online, via your Personal Tax Account or business tax account. Alternatively, you can call HMRC’s Self Assessment helpline.
If you have been affected and no payments on account are shown on your record, you have the following options:
- You can pay all your tax due for 2018/19 in one go on 31 January 2020 without incurring any interest or penalties for not paying any payments on account.
This has the advantage of only paying what you owe for the 2018/19 tax year as you should have completed and filed your 2018/19 tax return by then, and so you will know the exact amount that will be due for 2018/19. However, it also means you might have a much larger payment to make than usual in January 2020, as not only will you need to pay the whole of your tax bill for 2018/19 but also your first payment on account for 2019/20 if this is applicable. If you have already paid the first payment on account for 2018/19, this will be offset against the total amount due for 2018/19 as long as it has not been repaid by HMRC before 31 January 2020.
- If you know what your 2018/19 payments on account should be, you can make a voluntary payment of this sum to HMRC and this should be credited to your tax record by HMRC.
This means you should have a smaller amount to pay in January 2020 which may be better for your cash flow, however there is a risk that HMRC may automatically repay the sum before January 2020 as there is no amount showing as due on their records.
To avoid this repayment, you should call HMRC on the Self Assessment helpline and ask them to set up the 2018/19 payments on account on your tax record, in line with the details submitted on your 2017/18 tax return. But – be warned – if you have not paid the first instalment payment for 2018/19 due in January 2019, this approach will create a late payment interest charge in respect of this until it is paid.
You should also note that if HMRC reinstate 2018/19 payments on account at your request and you haven’t paid the first instalment, any payment you make now should automatically be allocated against the first instalment rather than the second.
You therefore need to think very carefully before you do this, as you might be better off instead setting the money aside in a separate bank account and paying it all in one go on 31 January 2020 (as in (a) above).
Kellie’s 2017/18 Self Assessment liability was £2,500 (income tax and class 4 National Insurance contributions).
She was therefore due to make 2018/19 payments on account of £1,250 on 31 January and 31 July 2019. However, these were not set up on her record. Kellie only paid the balancing payment for 2017/18 on 31 January 2019, as that was the only amount shown as owed on her statement of account.
Kellie has a reminder in her diary to pay some tax on 31 July 2019, so is surprised when no statement of account arrives in the post. (Note that she has not opted for online statements only.)
She contacts HMRC and is told that the payments on account have not been set up on her record, so she does not need to pay anything now. However, Kellie realises that she needs to save up to pay all of her 2018/19 tax in one go on 31 January 2020, plus the first payment on account for 2019/20.
Get your tax return done and budget for the correct tax payments!
It is advisable to get your Self Assessment tax return for 2018/19 done as soon as possible so that you can calculate your exact liability for the year. You will then know what extra amount you need to budget to pay in January 2020, if appropriate.
In the example of Kellie above, if she now does her 2018/19 return and finds out that her tax liability is £1,750, she will need to budget to pay that on 31 January 2020, plus half as much again (£875) – a total of £2,625.
Where can I find out more and get help?
Our guidance on Self Assessment tax returns is found in our self-employment section (although note that it is not just the self-employed who pay tax via Self Assessment – see Do I need to complete a tax return?).
Those who are struggling with Self Assessment should look at our Getting Help page for details of how to find a professional adviser, including information about HMRC’s ‘Needs Enhanced Support’ service and contact details for the tax charities for those who cannot afford to pay.