I have been asked many times recently to explain to clients and friends how HMRC’s payments on account system works when submitting an SA100 Self Assessment Tax Return.
It is probably best explained by way of an example – see below
If you would like an editable version of this file for your own use please use the contact us link and send us a message requesting the editable file.
There is also more guidance from HMRC here
The assumption is that as time moves on your business will increase its profits. Once you have payable tax of more than £1,000 then you become liable to make payments on account. These equate to half of the previous years tax liability.
So for example, if you have a tax liability for 2014-2015 of £2,000 you will need to make payments on account towards 2015-2016 of £2,000. These payments are made in two parts, half in January and half in July. Obviously these are then deducted from the bill next year and new payments on account are calculated.
We are happy to explain these figures in more detail and personalise them to your own liabilities if necessary. Just contact us!