FAQs on HMRC Payment on Account

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We had lot of questions from our clients regarding this and hope this article will help them understand this better.

WHAT IS PAYMENT ON ACCOUNT?

‘Payments on account’ are payments made towards your following year’s income tax. In other words “Advance Payments” towards following years’ Income Tax. There are two payment dates – 31 January and 31 July. Each payment is half of the amount due for the previous year.

HOW IS IT CALCULATED?

Easy to explain through and Example. Assume your personal tax bill (mainly due to Dividend Tax) for 2017/18 is £2,000. Payment due date for this is 31st January 2019.

You would need to make a below payment using your personal bank account on or before 31st January 2019.

Personal Tax bill for 2017/18 = £2,000
50% Payment on Account for 2018/19 = £1,000
Total Payment = £3,000

Rest of the 50% (i.e £1,000) will need to be paid to HMRC by 31st July 2019.

WHAT WILL HAPPEN TO SUCH ADVANCE PAYMENTS?

These two payments will offset your Tax liability for 2018/19.

Assume your personal tax bill (mainly due to Dividend Tax) for 2018/19 is £3,000. Payment due date for this is 31st January 2020.

You would need to make a below payment using your personal bank account on or before 31st January 2020.

Personal Tax bill for 2018/19 = £3,000
Less: Payment on Account Credits = (£2000)*
50% Payment on Account for 2018/19 = £1,500
Total Payment = £2,500

Rest of the 50% (i.e £1,500) will need to be paid to HMRC by 31st July 2020.

WHAT IF YOU OVERPAY?

If your Tax bill is lower than your advance payments, HMRC will refund the additional amount to your personal account.

WHERE DO YOU MAKE THIS PAYMENTS TO?

You need to make these payments to HMRC Bank Account no

Sort code: 08 32 10
Account number: 12001039
Account name: HMRC Cumbernauld

or you can pay online via HMRC

WHAT REFERENCE NUMBER SHOULD YOU BE USING FOR THIS PAYMENT?

You should use your Personal UTR number.

WHICH BANK ACCOUNT SHOULD YOU USE FOR THE PAYMENT?

This is a personal tax so need to be paid from your personal Bank Account and NOT from the Business Bank Account.

Please note personal Financial Year 2016/17 – starts on April 6th 2016 and ends on April 5th 2017.

IF YOU ARE IN DOUBT

We are here to help.  Please contact us if you have any questions, we are always happy to help.

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