In theory paying for your self-assessment tax liability should be easy - you do your calculation, submit and pay by 31st January (after the tax year has ended on 5th April). That 31st January is the ultimate deadline for a self assessment tax return, assuming there are no extenuating circumstances in your own personal situation. 

However, in reality, there are a few complications and nuances that we will explore below. It is unfortunately not that simple!

If you’re ready to pay your tax bill, you should do this via the HMRC website.

Understanding Your Tax Payments and Deadlines

Each taxpayer with a liability over £1000 must make three individual payments towards their tax bill per year, based on their final liability from the previous year. 

Within the self assessment tax system, it is then assumed that you will make a similar amount the following year, and so on Tax Return Submission day (31st January) you are required to pay your first “payment on account”. Since it is based on your previous earnings, this first payment equates to 50% of the liability on the last tax return submitted. This is considered your 1st payment on account. 

Then by the 31st July you pay the same amount again (50% of the previous year liability) as your 2nd payment on account. 

This means that when it comes to submitting your next tax return, you should only have to pay the balance for that tax year (or even get a refund) in order to conclude that year’s submissions. That being said, since the process is a cycle, it continues. This means that as you pay your final payment for the current tax year, you will also  need to pay the next year's first payment on account.  

This payment schedule can be simplified:

By January 31st By 31st July

Pay 50% of Previous Year Liability Pay 50% of Previous Year Liability
(aka. 1st Payment on Account) (aka. 2nd Payment on Account)

Pay Balance on Previous Year Tax Statement

If you cannot pay your Payments on Account, or you know that there is a significant reduction in your profit for the year then you can request a reduction of your payments on account with HMRC. 

Although the way in which you submit your tax return will be changing when Making Tax Digital (also known as MTD) comes into effect, the way in which you pay won't be. Those will remain the same. 

If you're confused about what you need to pay and when for your Self Assessment Income Tax, this short video will help.

This means that when it comes to submitting your next tax return, you should only have to pay the balance for that tax year (or even get a refund). But the cycle continues, so don't forget that you will also need to pay the next year's first payment on account.  

If you cannot pay your Payments on Account, or you know that there is a significant reduction in your profit for the year then you can request a reduction of your payments on account with HMRC. 

Although the way in which you submit your tax return will be changing when MTD comes into effect, the way in which you pay won't be. 

Transcript of Video: Exploring Content and Deadlines for Self Assessment Tax Return

Are you confused about what you need to pay and when for your taxes? This short video from APARI is going to help you.

So you are a business or a landlord. Every year you earn money. 

You’ve been running for a couple of years already. So we are going to look at your third year of activity. 

In the UK, the tax year runs from 6th April to 5th April. 

And your tax bill for year 3 is finalised when you submit your tax return for Tax Year 3. 

The deadline for that tax return is 31st January. This is actually during Tax Year 4. 

Now, as you’d expect, HMRC don’t want to wait for your tax return to get your money. 

So they predict what you’re likely to owe for year 3. And they do that using your final tax bill for year 2. 

Half of that money has to be paid by January of Tax year 3. This is known as Payment on Account 1. 

The other half is due by the following July, which is actually during Tax Year 4. This is known as Payment on Account 2. 

Now, you get your final tax bill for Year 3 when you file your tax return. Most people do this after July. 

But you’ve already paid those estimates. So now you just need to pay the difference between what you’ve already paid and the actual final bill. This is known as a balancing payment.

The deadline for this payment is the same as the deadline for the tax return – 31 January. If you file earlier, you don’t need to pay any earlier. 

And so that's it! As simple as that: your filing and payment sorted for one year of Self Assessment! 

BUT there are a couple of other things to mention:

• When you make your first payment on account for Year 3, you also pay the balance for Year 2.

• And when you pay your balance for Year 3, you also make the first payment on account for Year 4.

And so that cycle continues...forever.

And remember if your profits are going to be very different to last year, it’s easy to ask HMRC to change those payments on account.

Thanks for listening! 👍

APARI: Helping You Manage Your Tax Deadlines

Understanding tax isn’t easy; however, whether you are a sole trader or a tradesperson, we make tax simpler. At APARI we have designed HMRC recognised software to give you complete control and visibility over your tax return. 

Through using the APARI software, you get more than just help submitting tax returns. Instead, you also get access to digital record keeping, a full business toolbox, real time visibility over profits, and access to cloud-based storage. Through using APARI you can also be confident that we are HMRC compliant, and ready for Making Tax Digital.

So, what are you waiting for? Why not check out APARI today.

Want to know more about self-assessment? We created the Ultimate Guide to Self-Assessment Tax Returns for YOU!