When you first register for self-assessment it can be a little daunting, so here is a quick guide to deadlines, penalties and payments on account.
31 January – filing date for online tax returns, and, deadline for balance of prior year tax liability and 1st payment on account
5 April – this is when our tax year ends
31 July – deadline for 2nd payment on account (if required)
31 October – paper filing deadline
30 December – if you want to have your tax liability collected through your tax code, then you need to file online before this date. (This is only possible if your liability is less than £3,000 and your income exceeds £30,000).
We regularly get asked what the penalties are for late filing of tax returns or late payment of tax liabilities.
Tax Return – Late Filing
- 1st February – 1 day late – £100
- 1st May – 3 months late – £10 per day fine, up to a maximum of £900 (90 days)
- 1st August – 6 months late – £300 fine or 5% of the tax owing (whichever is greater)
- 1st February – 12 months late – another £300 fine or 5% of the tax owing (whichever is greater)
Tax Liability – Late Payment
- 1st March – 30 days late – 5% charge on the tax owed on that day
- 1st August – 6 months late – 5% charge on the tax owed on that day
- 1st February – 12 months late – 5% charge on the tax owed on that day
Additionally interest is charged on the outstanding amount, plus the 5% charge at a rate of %.
Payments on Account
Payments on account are advance payments on your tax bill and often come as a shock to people the first time they have to pay them.
If you tax liability at the end of the year is in excess of £1,000 AND you’ve paid less than 80% of your tax liability through your tax code, then you will have a to make payments on account.
The easiest way to explain payments on account is through an example.
So, Fred was self employed and when he prepared his tax return for 5 April 2018 he had a tax liability of £10,000. This is Fred’s first year of being self-employed, so he has not made any payments towards this liability already.
Tax return to 5 April 2018 – tax liability £10,000 – due 31 January 2019
As the liability exceeds £1,000 and Fred did not pay any tax through his tax code, he needs to make payments on account. These are each calculated at 50% of the previous year’s liability – so in Fred’s case £5,000 each.
- Therefore his payment schedule is as follows:-
- £10,000 – Liability from 2018 tax return
- £5,000 – 1st payment on account
- £15,000 – TOTAL due by 31 January 2019
- £5,000 – 2nd payment on account due 31 July 2019
The following year, Fred had a tax liability of £12,500, so his payment schedule would be:-
- £12,500 – Liability from 2019 tax return
- (£5,000) – 1st payment on account paid 31 January 2019
- (£5,000) – 2nd payment on account paid 31 July 2019
- £2,500 – balance due for 2019
- £6,250 – 1st payment on account for 2020
- £8,750 – TOTAL due by 31 January 2020
- £6,250 – 2nd payment on account for 2020
Can payments on account be reduced?
Absolutely, if you close your self employed business for example, then your payments on account can be reduced. This is done via notification to HMRC.
Need assistance with deadlines, penalties or payments on accounts? Contact us on email@example.com