Self-Assessment taxpayers only have until 31 July 2022 to make their second payment on account for the upcoming tax year.

The payment on account system allows taxpayers to spread the cost of their tax bill and is calculated by HM Revenue & Customs (HMRC) based on your previous year’s tax bill. These payments are due every year on 31 January and 31 July.

Each of the two payments on account will normally be 50 per cent of your previous tax bill, but if you are unsure of how much you owe you should seek advice immediately.

Of course, individual circumstances can change throughout the year and your income may fluctuate.

If you believe that your income for the next tax year will be lower than the previous tax year, you should apply to HMRC to have your payment on account reduced.

You can do this via your online HMRC account or by sending form SA303 to your tax office.

Be aware that payments on account can include Class 4 National Insurance Contributions, where applicable, but not other deductions such as student loan repayments or Capital Gains Tax charges.

You should know whether you are required to make a payment on account, but some Self-Assessment taxpayers may be exempt if:

• The tax bill for the previous year was less than £1,000 after PAYE
• More than 80 per cent of your tax was deducted at source through PAYE

How to make a payment on account

To pay your second payment on account you need to use your payment reference. This is your Unique Taxpayer Reference (UTR) number followed by the letter ‘K’.

You can pay your Self-Assessment payment on account by:

• A debit card or corporate credit card online
• A bank transfer
• A direct debit at your bank or building society if you still get paper statements from HMRC, or you have the paying-in slip HMRC sent you
• Cheque through the post

Make sure you process this payment well in advance of 31 July to ensure the payment clears in time.

From April 2024, HMRC will be moving much of this tax paying process online as part of its Making Tax Digital for Income Tax strategy.

This will also require Self-Assessment taxpayers to keep digital records and send returns using the appropriate software.

Be aware that if a payment on account is still unpaid more than 30 days from the due date for that year’s balancing payment, a late payment penalty equal to five per cent of the tax unpaid at that date can be issued.

Need help managing your tax payments? Speak to our team today.