THOUSANDS of self-employed people have just days to pay the second instalment of their tax bill.
The deadline for dealing with your “payment on account” bill is this Sunday, July 31.
Payments on account are two advance payments that most self-assessed taxpayers must make each year when settling their tax bills.
These payments are made on January 31, and at the end of July and are and estimate of the tax you owe.
So, on 31 January 2022 you’ll have paid roughly half of what the taxman estimates will be due for the tax year that ran from 2021/22.
On 31 July, you pay the other half – this is the second payment on account.
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Once you have submitted your tax return for the tax year – due in January 2023 – you’ll make up the difference between the estimate and reality, or get a refund if you’ve overpaid.
You have to make the payments on account every year unless your last Self Assessment tax bill was less than £1,000 or if you’ve already paid more than 80% of all the tax you owe.
For example, if you have paid through your tax code or because your bank has already deducted interest on your savings.
You can check your payments on account using this tool from HMRC to work out what you should be paying.
People might feel they are unable to pay the bill as the cost of living crisis hits finances.
Millions are paying out £2,300 more than a year ago on energy bills alone.
And under the October price cap, prices are expected to rise by 77% -meaning those on typical use could see their bill hit £3,500.
But experts have said there are a number of things you can do if you are struggling.
Helen Morrissey, senior pensions and retirement analyst at Hargreaves Lansdown said: “Unless people have prepared well in advance, they may be left scrabbling around to find the cash to make this payment.
If you know your tax bill will be lower than the last one, you can apply to reduce your payment on account through the Government Gateway or by completing a paper form and sending it to the taxman.
For more information on how to do this, you can visit the government’s website.
However, you should be careful if you decide to do this as it is found that you underpaid, you will have to pay interest on the outstanding amount – which could be a big financial hit.
An estimated one in six people make mistakes on their tax return which mean they pay too much tax, according to Hargreaves Lansdown.
If you’ve paid too much in any of the last four years you can correct your tax return and may be due a refund.
You might have overpaid for a number of reasons – for example if you were on the wrong tax code.
You can check if your tax code is correct by using HMRC’s online tool or MoneySavingExpert’s free online tax calculator.
If you’re within 35 days of a payment on account being due, HMRC will cut your payment on account instead of issuing a refund.
You should get in touch with HMRC and let them know you’re having issues. They may allow you to spread your payments.
This is known as a Time to Pay arrangement.
It’s a good idea to do this rather than bury your head in the sand.
Because payments on account are advance payments, you don’t get the same serious penalties as if you miss your “balancing payment” deadline on January 31.
But you could be charged interest on what you owe.
If you haven’t fully settled your bill by the January deadline you will face penalty fines.
You can contact HMRC online or by phone on 0300 200 3300.
You can also write to them at:
Pay As You Earn and Self Assessment
HM Revenue and Customs
BX9 1AS
United Kingdom
Neela Chauhan private client tax partner at UHY Hacker Young said: “Anyone who thinks they won’t be able to make that payment by July 31 shouldn’t be afraid of talking to HMRC about it.
“Its officers are generally understanding of the financial pressures facing people. There is usually scope for them to agree a schedule of payments that works for both sides.”
Read More on The Sun
Elsewhere on The Sun you can read about how to get help if you are struggling with bills.
And we spoke to a debt expert about how to reduce payments at this difficult time.
