HMRC payments on account
Discussion
Just done my tax return for 2023/4.
Since I qualified for my state pension in May 2023, there's a higher tax bill for my self-employment (state pension is always paid gross).
I also have a couple of company pensions, which are taxed at source.
My tax bill is usually between £700 and £900, and I just have to make one payment by January 31st- nearly 10 months after the tax year ends.
2023/4, my tax bill is £1700. Over the £1000 threshold, so I now have to make payments on account in January and July for the current tax year.
This means that my 2024/5 tax bill will have been paid (apart from a smallish balancing payment or refund) by July 31st 2025 - a full 6 months earlier.
I understand that I'm still paying my tax in arrears, but going over the threshold means I have 4 months to pay it, rather than 10, as well as paying half of it during the year.
Since I qualified for my state pension in May 2023, there's a higher tax bill for my self-employment (state pension is always paid gross).
I also have a couple of company pensions, which are taxed at source.
My tax bill is usually between £700 and £900, and I just have to make one payment by January 31st- nearly 10 months after the tax year ends.
2023/4, my tax bill is £1700. Over the £1000 threshold, so I now have to make payments on account in January and July for the current tax year.
This means that my 2024/5 tax bill will have been paid (apart from a smallish balancing payment or refund) by July 31st 2025 - a full 6 months earlier.
I understand that I'm still paying my tax in arrears, but going over the threshold means I have 4 months to pay it, rather than 10, as well as paying half of it during the year.
Your Self Employed profits will now be fully taxed as your State Pension and other pensions absorb most if not all of your tax allowances. This means the amount of tax collectible under Self Assessment is higher than in previous years, pitching it over the £1,000 threshold where Payments on Account kick in for the following tax year.
You CAN apply to have the Payments on Account reduced if you think the amount of Self Assessment tax due for tax year 2024/25 will be lower than the 2023/24 level.
You CAN apply to have the Payments on Account reduced if you think the amount of Self Assessment tax due for tax year 2024/25 will be lower than the 2023/24 level.
Yes, everything is correct. My tax code is pretty much split up between the 2 company pensions, with me paying tax "at source". My tax bill is just for the self-employment income.
My point was, going over the threshold means you have to pay nearly half the tax bill 12 months earlier, and the other half 6 months earlier, with just a small balancing payment at the "normal" time.
My point was, going over the threshold means you have to pay nearly half the tax bill 12 months earlier, and the other half 6 months earlier, with just a small balancing payment at the "normal" time.
clockworks said:
Yes, everything is correct. My tax code is pretty much split up between the 2 company pensions, with me paying tax "at source". My tax bill is just for the self-employment income.
My point was, going over the threshold means you have to pay nearly half the tax bill 12 months earlier, and the other half 6 months earlier, with just a small balancing payment at the "normal" time.
That is correct. The only way to avoid it is to reduce the income you receive that gives rise to the Self Assessment tax liability.My point was, going over the threshold means you have to pay nearly half the tax bill 12 months earlier, and the other half 6 months earlier, with just a small balancing payment at the "normal" time.
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