The self assessment tax payments dates are simply the 31st January and 31st July, but how much you have to pay can be complicated. Below, we explain how much you have to pay on the self assessment tax payment dates.
How the self assessment tax payment dates work
There are two self assessment tax payment dates you need to pay your tax by. The method of payment usually involves one balancing payment and two payments on account of your tax liability as follows…
- one balancing payment on 31 January after the tax year
- one 50% payment on account on 31 January during the tax year and
- another 50% payment on account on 31 July after the tax year.
The payments on account are based on the net income tax and national insurance liability of the previous tax year. That’s your net tax payable after deductions for PAYE paid, but before any payments on account are deducted.
You can ignore capital gains tax of the previous year when calculating the payments on account. You pay all CGT as part of the final payment due on 31 January following the end of the tax year.
A final payment (or repayment) is due on 31 January following the tax year.
There is a 5% surcharge on any taxes that remain unpaid after 28 February, and a further 5% on taxes not paid after 31 July. For the most up to date details on self assessment tax payment penalties see here.
An example of self assessment tax payments…
If your net tax liabilities are the following:
- 2020/21 is £0
- 2021/22 is £2,000
- 2022/23 is £5,000
- 2023/24 is £800
… you will need to make the following payments by:
- 31/01/22: £0 (remaining balance of 2020/21 £0, no payment on account required)
- 31/07/22: £0 (no payment on account required)
- 31/01/23: £3,000 (remaining balance on 2021/22 £2,000, plus half of 2021/22 as a payment on account towards 2022/23)
- 31/07/23: £1,000 (half of 2021/22 as a payment on account towards 2022/23)
- 31/01/24: £5,500 (remaining balance of 2022/23 £3,000, plus half of 2022/23 as a payment on account towards 2023/24)
- 31/07/24: £2,500 (half of 2022/23 as a payment on account towards 2023/24)
- 31/01/25: refund of £4,200 (excess payments on account)
- 31/07/25: £0 (payment on account not required)
Can you avoid tax payments on account?
You don’t have to make payments on account if…
- income tax and NIC liability for the previous year (net of tax deducted at source) is below £1,000 or
- if your tax deducted at source (e.g. PAYE on your payslips) was more than 80% of the income tax and NIC liability for the previous year.
Reduce your tax payments on account
You can also apply to have the payments on account reduced if you expect your liability for a tax year to be less than the previous year.
Contact us if you’d like any help with reducing your self assessment tax payments or with your tax returns.About Us Our Prices Instant Quote
Marginal Tax Rates
Newsletter issue – June 2014
What rate of tax would you pay on an additional £1 of earnings? If your annual income is between £41,865 and £150,000 you may think the tax rate would be 40%, but the peculiarities of the UK tax system mean you could pay much more.
To start with earned income above the 40% threshold carries a national insurance charge (NICs) of 2% so for every £1 you earn above £41,865 (for 2014/15) you will pay 42% in tax and NICs.
Child benefit is withdrawn from the highest earner in the family at the rate of 1% of the benefit for each £100 of income exceeding £50,000 per year. This translates into an effective marginal tax rate of 60% on income between £50,000 and £60,000.
When your income exceeds £100,000 your personal allowance is withdrawn at the rate of £1 for every £2 of income above £100,000. This is an effective tax rate of 62% including NICs.
From 6 April 2015 married couples will be able to transfer up to 10% of their personal allowance between them. This will allow up to £1,050 of the allowance to be transferred from the person who earns less than £10,500, to their spouse who earns up to the 40% threshold. Thus £1 of additional income that takes you over the 40% threshold will mean you lose the whole of that transferable allowance – an infinite marginal tax rate.
If you are able to control the level of your taxable income, perhaps because you run your own business, it makes sense to adjust your income to avoid those high marginal tax rates. Perhaps you could employ other members of your family, or take them into business with you as partners, to spread the business income.
Payments of pension contributions and Gift Aid donations can stretch your 40% threshold, so the higher earner in the family should making those charitable donations and pay pension contributions. We can help you plan to avoid the highest tax rates and make the best use of all allowances available.
This helpsheet gives you an outline of what you need to do when going self employed, and what it really means. There are a number of advantages of going self employed, but you must also comply with various regulations including the tax law and you must register as self employed with HMRC.
Form of Your Business
When you decide to work for yourself you need to choose which form your business will take. The most common forms of business are:
- Sole-trader – you run the business on your own, usually under your own name;
- Partnership – you and one or more other people jointly run the business;
- Limited liability partnership – a special type of partnership that gives you and the other business owners more protection from creditors;
- Limited company – an organisation that you own and control, which carries out the business on your behalf.
If you start your business as a sole-trader or as a partnership you are legally going self employed.
When you choose to start your business as a limited company you will normally be a director and an employee of that company. You will be employed rather than self-employed, but in practice you will work for your own business.
It is important to understand the difference between being employed by your own company, and being self-employed, as it will affect the tax you pay, and the regulations you have to comply with. This helpsheet deals only with the advantages and regulations of being self-employed.
Tax Advantages Of Going Self Employed
Once you register as self employed you only have to pay income tax twice a year on 31 January and 31 July. This means you can hang on to your money for longer than an employee who has tax deducted under PAYE from every pay packet.
You must make sure you have the money ready to pay the tax when it is due as you will be charged interest on any tax paid late.
If you work in the construction industry you may have tax deducted from each of your sales invoices by the contractor you work for, under the Construction Industry Scheme (CIS). You may be able to reclaim some of the CIS deductions each year when you submit your tax return.
Expenses to Claim
- The cost of any goods or services you use fully for your business (sometimes even if you paid for them before going self employed) can be deducted from your sales revenue for tax purposes. Where an item is used partially for your business and partly for private purposes, such as your private car or home, you can claim the business proportion of the costs against your business profits. However, you must be able to justify the business proportion with evidence such as the miles driven, or space used by the business.
- Capital allowances – if you purchase an item that is expected to last several years, such as a van, you can claim a special deduction known as a capital allowance. The first £250,000 you spend on equipment each year qualifies for 100% capital allowances in the year of purchase. This does not include cars.
- Loan interest – if you take out a business loan the interest paid on that loan can be deducted from your sales revenue. The loan must be taken out to fund your business, rather than a personal loan or credit card borrowings.
- Government funding – if you live in an area in the UK that has been designated as a regeneration area you may qualify for a government funded programme to help people going self employed or starting their own company.
- Charitable support is also available from the Prince’s Trust throughout Britain for those aged 18 to 30 who wish to start their own business.
- Self-employed credit – if you have been registered as unemployed for at least six months you may qualify for a self-employed credit of £50 per week if you start your own business. Ask at your local Jobcentre Plus office for more details.
- Working and child tax credits – You may qualify for these after going self employed. Your tax credit award is based on your family’s joint income including your self-employed profits, but it will also be determined by the number of hours worked by the adults in the family, and the number of children aged under 16.
Your Tax Obligations
Tell the Taxman
When you start your own business you must register as self employed with the Taxman (HMRC). It is best to do this as soon as possible after you start to charge your customers for the goods you sell or for the services you provide. There are a few ways to register as self employed…
- On the HMRC website – http://www.hmrc.gov.uk/self employed/register-selfemp.htm
- By telephoning the tax office on: 0300 200 3504
- By completing the leaflet CWF1: Going self employed and registering for national insurance contributions and tax.
You must register as self employed even if you make a loss from your business. Every partner in a partnership business must register as self employed separately. If you do not register with the Taxman by 5th October following the end of the tax year in which you started your business you may be charged a penalty of up to 100% of the tax and national insurance you do not pay as a result of the failure to notify.
If you’re going self-employed you will need to pay two types of national insurance contributions (NICs) known as class 2 and class 4.
You must complete a self-assessment tax return every year to report the income and expenses from your self employed business and any other income you have to the Tax Office.
Register for VAT
When your sales for 12 months reach the compulsory VAT threshold, you must register for VAT within 30 days.
How We Can Help You
If you’re thinking of going self employed or already have done, it’s never too soon or late to talk to us. We can help you register as self employed with the Tax Office for tax, national insurance and VAT. We can show you how to keep accurate records for your business and complete tax and VAT returns. As your business grows we can discuss tax planning ideas with you to ensure your tax bills are kept as low as possible.
Personal Tax Return
If you are required to complete a return, they are normally issued to you at the beginning of April each year. The basic return is 10 pages but many sources of income require supplementary pages to be completed as well. Some people receive a short tax return of only 4 pages.
As well as your income it deals with the allowances and reliefs that you can claim.
Paper returns have to be filed by 31 October following the end of the tax year and HMRC will calculate your liability for you. For online returns you have until 31 January following the end of the tax year to file the return. If you file the tax return online through the HMRC website the software will calculate your tax liability for you.
The penalties for late Self Assessment returns are as follows:
- Initial £100 penalty for late filing of the tax return, irrespective of the tax due or if you have paid tax on time.
- If you haven’t filed your return after 3 months daily penalties of £10 per day apply, capped to £900.
- If you haven’t filed your return after 6 months a further penalty of 5% of the tax due or £300: whichever is greater.
- After one year, another 5% or £300 charge, whichever is greater. In serious cases the penalty after 12 months can be up to 100% of the tax due.
The penalties are applicable even if no tax is due.
Corporation Tax Return
The corporation tax self-assessment return (CTSA) must be submitted to HMRC along with the accounts and tax computations, although it is possible to file all this information online through the HMRC website. The filing deadline for the CTSA return (plus accounts and tax computations) is normally 12 months from the end of the accounting period. If the return is late there are penalties as follows…
- Up to 3 months late – £100 (increasing to £500 for a third consecutive late return)
- Over 3 months late – £200 (increased to £1000 for a third consecutive late return)
- 6 to 12 months late – Extra tax geared penalty of 10% of the unpaid tax.
- More than 12 months late – 20% of the unpaid tax.