Payment on account confusion

Under self assessment taxpayers are required to make payments on account of their tax liabilities. The payment on account instalments consist of two payments on account of equal amounts:

  • the first on 31 January during the tax year and
  • the second on 31 July following the end of the tax year.

These are set by reference to the previous year's income tax liability and Class 4 NIC if any.

A final payment (or repayment) is due on 31 January following the tax year.Payments are not due where the previous year's liability is less than £1,000 or where 80% of the previous year's bill was met by tax deductions at source.

The Association of Taxation Technicians (ATT) has warned that 'some people may not receive the tax demands they expect by the end of July' for their self assessment, even if it may be due.

ATT has issued a press release saying that the HMRC system did not correctly process all the payments on account information for 2018/19. As a consequence, the demand for the first payment on account for January 2019 may not have been issued.

Unless those taxpayers contacted HMRC, the next demand for payment on account, due on 31 July 2019, may also not be issued. HMRC has confirmed that if it has not issued a demand for payment on account, the full amount will be requested in January 2020.

Making a voluntary payment may not be processed correctly. If you want to make a payment on account that is due, then taxpayers or their agents are advised to contact HMRC.

Jon Stride, Co-Chair of the ATT's Technical Steering Group, said:

'If a taxpayer does not make any payments on account during 2019, then their tax bill in January 2020 could be significantly larger than they are expecting and could come as quite a shock. We are concerned that taxpayers may not realise what has happened and might not set aside enough money to meet their full tax bill in one amount next January.'

Internet links: AAT press release GOV.UK self assessment bills

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