First of all, what is Payment on Account? “If the tax you owe HMRC is over £1,000 you will be asked for a Payment on Account for the following tax year too. There are two payments on account, each totalling half of the tax due for the previous year. Therefore, when you complete your return you’ll be asked to pay the tax owed for the year on the return, plus the first payment on account for the following year (also due by the 31st January). You will then need to pay the remaining payment on account by the 31st of July.”
Cheryl says Don’t Panic there are options if you haven’t managed to save all the money to pay the bill. “HMRC can offer payment plans. Depending on the amount you may be able to do this online – just search in Google for a payment plan for tax bill and the details should come up – you will need to log in to your government gateway to set this up. Or you can call them and talk through setting up a payment plan, they will ensure you don’t pay more than you can afford to. Sometimes they may ask for payment upfront, but not always.”
How can people plan for two payments a year? “I’d always recommend putting money aside from each payment you receive from customers – it doesn’t have to be the full 20%, but if you do and you’ve saved more than you need to pay out then it’s nice to give yourself a little bonus! But saving as you go will mean it’s not such a shock and you should then have plenty to cover the bills when they’re due.”
Cheryl Sharp is the founder of Pink Pig Financials
