Payment on Account

When tax falling due for a particular tax year comes above a certain threshold HMRC requires the same amount paid again 'on account' of the following tax year. This is split into two payments, the first due on or before 31st January (normally paid along with the principal tax) and the second due on or before 31st July. The reasoning behind this is that the tax amount will generally remain similar ongoing, however, can be adjusted on determination of the actual tax due by way of reclaim, in the case of overpayment, or a further 'balancing' payment in the event of an increased tax liability.

Certain circumstances can override or reduce the request for payments on account, subject to HMRC's discretion and, in some circumstances, payments on account will not be due at all, even if the current tax bill exceeds the threshold. This will principally occur when 80% or more of the total tax bill has been collected at source.