If you are self-employed or have significant rental or other unearned income you will probably be required to pay your tax in 3 instalments each year. This will often only be the case when you are into your second year of business.
The first two payments will both be the same. They are due on:
- 31 January during the tax year e.g. for 2015/16 the first payment on account is due on 31 January 2016.
- 31 July following the tax year e.g. for 2015/16 the second payment on account is due on 31 July 2016.
These payments on account are based on the previous year’s net Income Tax liability (e.g. Income Tax due less tax deducted at source). The actual calculation will be prepared by your accountant or by HMRC. They will, in any case, send you a detailed statement of account setting out the amounts due.
You have the right to request a reduction in your payments on account if you believe that the current year’s net Income Tax liability will be less than the previous year. However, interest may be charged if the figures given to HMRC are incorrect.
No payments on account are required where your net Income Tax liability for the previous tax year is less than £1,000 or if more than 80% of that year’s tax liability was collected at source.
The third (or only) payment of tax will be due on 31 January following the end of the tax year e.g. for the 2014/15 tax year a final payment is due on 31 January 2016. This is the same date as you will have to pay any Capital Gains Tax and you will also have to make your first payment on account for 2015/16 at the same time.