Self-Assessment taxpayers who make advance payments towards their bills are being advised to make their payments before the deadline of midnight on 31 July or run the risk of late payment interest charges which are currently at a 15-year high.
Self-Assessment taxpayers have 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.
Each payment is half the previous year’s tax bill, with payments due by midnight on 31 January and 31 July. If there is still tax to pay after the payments on account are made, there will be a balancing payment due by midnight on 31 January in the following year.
Commenting ahead of the deadline, Dawn Register, Head of Tax Dispute Resolution at accountancy and business advisory firm BDO said: “With many people struggling with higher living costs, some may be tempted to underpay their payment on account. But taxpayers should be aware that doing so will mean a 7.5% late payment interest rate being applied to all outstanding monies owed. This is the highest rate we’ve seen for 15 years, and the unwary may be alarmed at how quickly this charge can ramp up your debt.
“If you are sure your tax bill is going to be lower than last year, you can go online to ask HMRC to reduce your payments on account. For those who are going to struggle to pay, there is always the option of setting up a Time to Pay arrangement with HMRC. For debts of up to £30,000 this can be done fairly easily online.”