The Balancing Payment is the second half of your Payment on Account, due on 31st July of the current tax year.
If you’re self-employed (and at least 20% of your earnings are not taxed via PAYE), you need to pay income tax in advance through Payment on Account:
- Half by 31st January (the usual Self Assessment tax return deadline)
- The other half by 31st July (the “Balancing Payment”)
The first time you pay through Payment on Account, you’ll get a tax bill for 150% of what you were expecting.
100% is for the tax year that just ended; the remaining 50% is half of the advance payment for the current tax year.
You’ll have to pay the remaining 50% of what you owe that tax year by July.
From then, you’ll pay half of your “expected” tax bill by January and the other half by July. If your actual income turns out to be less or more than you expected, your tax bill will be adjusted. You might even get a refund!
This is what’s called balancing.
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