Self-Assessment taxpayers required to make advance payments towards bills are urged to pay before midnight on July 31 - tomorrow - to avoid late payment interest charges at a 16-year high of 7.75%.
Self-Assessment taxpayers are required to make two payments on account every year, unless their last tax bill was less than £1,000 or they paid more than 80% of the previous year’s tax owed at source, for example through PAYE.
Each payment is half the previous year's tax bill, with payments due by midnight on January 31 during the tax year and July 31 after the end of the tax year.
If there is still tax to pay after the payments on account are made, there will be a balancing payment due by midnight on January 31 in the following year.
Commenting ahead of the deadline, Elsa Littlewood - a private client tax partner at accountancy and business advisory firm BDO - says: “Summer can be an expensive time of the year with holidays and childcare costs weighing on people’s budgets.
“But those who miss the deadline or underpay should be aware that a 7.75% late payment interest rate will be applied to all outstanding monies owed after July 31. This can have a dramatic impact on your overall tax bill as your debt to HMRC can ramp up very quickly indeed.
“Those affected will need to ensure they have available funds and arrange the payment in sufficient time to reach HMRC before the deadline.
“If you are sure your tax bill is going to be lower for 2023/24 than the prior year - for example you have already prepared your 2023/24 tax return - you can go online to ask HMRC to reduce your payments on account.
“For those who are going to struggle to pay, there is the option of setting up a Time to Pay arrangement with HMRC. For debts up to £30,000 this can be done fairly easily online.
“It is worth also remembering that if you have not yet paid your tax liability that was due on January 31 2024 - ie for the 2022/23 tax year - a 5% penalty can be charged for payments that are six months late. HMRC can also charge penalties if the tax return is filed late. To mitigate penalties you should look to bring any outstanding filings up to date as soon as possible.
“Unfortunately, scammers often take advantage of people at this time of year, so it is essential you are certain you are making the payment to the proper HMRC account.”
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