Payment on Account
A Payment on Account is a way of paying Income Tax and National Insurance in advance, usually if you’re self-employed. HMRC asks anyone earning more than 20% of their income outside of employment to pay in this way.
What you need to remember about it:
- on the first Self Assessment tax return you’ll pay the entire tax bill for last tax year, and half again on top if it as an advance payment for the current year’s tax bill. HMRC will estimate that you’ll earn the same. You do this before the 31st of January.
- then before the 31st of July, you’ll pay the other half
- if next year you end up earning either less or more, your Payment on Account will get adjusted.