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Payments on Account for Self-Employed in UK: Avoid Penalties & Save!


What Self-Employed clients need to know​?


Payment on account is a system used by HMRC to collect tax from self-employed individuals and businesses in the UK. It involves making two advance payments towards your tax bill for the following tax year.​


Who needs to make payments on account?​


You are required to make payments on account if your tax bill for the previous tax year was more than £1,000.​


When are payments on account due?


The first payment on account is due on 31 January and the second payment is due on 31 July.​


How to make payments on account​?


You can make payments on account online, by phone, or by post.​

Tips for managing payment on account​


  • Estimate your tax bill early and set up a dedicated savings account for your payments on account. This will help you to keep track of your savings and make sure you have enough money available when you need it.​

  • Consider using a payment plan if you're struggling to make the full payment on account amount. HMRC may be able to agree a payment plan with you, which will allow you to spread the cost of your payments over a longer period of time.​

What if I miss a payment on account deadline?

If you miss a payment on account deadline, you will be charged interest and a penalty. The interest rate is 5% per year and the penalty is 5% of the unpaid amount.​


Conclusion​


Payment on account is an important part of the UK tax system for self-employed individuals and businesses. By understanding your obligations and planning ahead, you can avoid late payment penalties and ensure that you meet your financial commitments.​

If you have any questions about payment on account, please contact us for advice.​


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