Payments on Account

What are payments on account?

When you are self employed and your tax liability for the tax year exceeds £1,000, you are expected to make payments on account (POA).  These are payments due to HMRC in January and July and are advance payments towards the following tax year.

Example:

Mark owes tax of £4,000 for the 2021/22 tax year, which is due for payment by 31st January 2023.  As his liability is over £1,000 (and he does not have PAYE income) he will also have to make payments on account towards the 2022/23 tax year.  Therefore, he will need to also make a payment on account of £2,000 by 31st January 2023 and a further payment on account of £2,000 by 31st July 2023.

Mark’s income rose in 2022/23 and his liability for the year was £5,000.  As he has already made two payments on account of £2,000 (total £4,000) he will only owe a further £1,000 in January 2024.  This is known as a ‘balancing payment’.

Payments on account are based on the tax and class 4 National Insurance contributions due, so do not include payment towards Class 2 NICs, student loan repayments, or capital gains tax.