Our 5-minute read – Tax Tips – for UK doctors and dentists will help you save tax, get organised with your tax affairs and make sure you meet important deadlines with ease.
This article does not constitute advice. Professional advice should be taken prior to acting on any part of it. The Financial Conduct Authority does not regulate tax advice.
31 July 2018 is the deadline
Only pay as you earn (PAYE) income is taxed in the month you earn it. The rest, (dividend income, rental income from property, self-employed income, locum income, etc) is taxed via self-assessment and there is technically a lengthy delay between when you see your money and when HMRC see theirs.
This is why the government mandates that you pay your tax liability for the previous year by the 31st January each year, whilst at the same time, you are also required to make advance payments for the current tax year.
One such payment on account gets remitted in January alongside your tax settlement. The end of this month – 31 July – marks the deadline to pay your second payment on account. Each of these payments are 50 percent of the prior year’s tax bill unless other arrangements are made to reduce these.
When you DON’T have to pay in July
You are required to make two payments unless one of the following situations apply: your last self-assessment tax bill was under £1,000, or you’ve already paid more than 80% of all the tax you owe (through your tax code or even an automatic savings interest deduction by your bank).
If both of these payments on account don’t clear your tax bill, and you still have tax to pay, there is a ‘balancing payment’ by midnight on 31 January next year that will be due.
While there are no fees or surcharges associated with late payments on account, it’s best not to delay getting what you owe to HMRC and remember to make your payment on account on time.
Interest may also apply if you should have made your payment on account in July but didn’t, which on a sizeable tax bill can certainly add up.
How to Pay
There are a number of ways to settle your payment. You can choose to pay via online or telephone banking, CHAPS, debit or credit card, BACS, cheque, or even in person at your bank.
We will be covering more on this later this month so keep an eye on our weekly tax tips to ensure you are remaining compliant and saving the most tax possible.
Next week, we will also provide information about how you may be able to reduce your July payment on account to leave extra pennies in your bank account.