Checking self-assessment payments on account

If you pay tax through self-assessment, you may be required to make payments on account towards your next tax liability.

Payments on account are normally made on 31 January and 31 July and are based on the previous year's Income Tax and relevant National Insurance liability.

That can cause problems where income has fallen. You could find yourself making payments based on profits or income that you no longer expect to receive.

It is possible to apply to reduce payments on account where you reasonably expect the eventual liability to be lower.

This might be appropriate where business profits have fallen, a source of investment income has disappeared, or a rental property has been sold.

Care is needed, however. If payments are reduced too far and the final liability turns out to be higher, HMRC can charge interest on the shortfall.

It is better to prepare a reasonable estimate rather than simply reduce payments because they appear inconveniently high.

The reverse situation is also worth considering. If income has increased significantly, the payments on account may not be enough to cover the eventual liability. Although you do not normally have to increase them voluntarily, knowing that a larger balancing payment is likely allows you to put money aside.

If your income has changed substantially, ask us to review whether your payments on account remain appropriate.