QUESTION: I am a small business owner and I complete my self-assessment tax return myself online. last year I had a good year and made good profits and had tax to pay. I recall having to make a 1st payment on account in January and I think I have another one to make in July. Can you tell what I need to do?
ANSWER: As a small business owner in the UK, you are required to make payments on account towards your self-assessment tax bill.
Here’s a breakdown of how you can find out what tax you have to pay, the deadlines, how to make the payment, and the consequences of missing the payment deadline.
As you are doing your own self-assessment tax returns and had a good year with significant profits, that means you are now making payments on account, which are advance payments towards your next tax bill.
Firstly, to find out what tax you owe, you’ll need to log in to your HMRC online account.
Once logged in, you can check your self-assessment account to see your tax return and the amount due.
You will need to use your government gateway user ID and password to access your account on the HMRC website.
In relation to the payments on account you have already made your first one in January.
The second payment is due by July 31. These payments are essentially prepayments towards your next tax bill, based on your previous year’s tax.
When it comes to making the payment, you have several options.
You can use online or telephone banking (just make sure you have your payment reference, which is your 10-digit unique taxpayer reference followed by the letter ‘K’).
Alternatively, you can set up a direct debit through your HMRC online account, pay by debit or credit card online via the HMRC website, or even visit your bank or building society if that’s easier for you.
There’s also the option to send a cheque but remember to allow enough time for it to clear by the deadline.
If you cannot afford to pay the July 31 instalment in full by the due date, then you should contact HMRC as they may agree to give you more time to pay.
If you’re worried about penalties and interest for late payments, it’s important to know that HMRC does charge interest on any late payments from the due date until the payment is made.
They also impose a 5% late payment penalty if you’re more than 30 days late, with further penalties if the payment remains outstanding after six and 12 months.
You may also be able to request to adjust your payments on account if you expect your profits to be significantly higher or lower this year.
For instance, if you think your profits will be lower, you can apply to reduce your payments on account to avoid overpaying.
Conversely, if you anticipate higher profits, you can increase your payments on account to avoid a large balancing payment at the end of the year.
You can do this through your HMRC online account by submitting a request to change your payments on account.
Staying organised is key. Keep track of your deadlines, maybe set some reminders, and regularly check your HMRC account to stay on top of things.
If you ever feel unsure or need specific advice, consulting a tax professional can be a great move.
Hope this helps, and best of luck with your business and your tax return!
Shane Martin is director at AAB Group Accountants. The advice in this column is specific to the facts surrounding the question posed. Neither The Irish News nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
