PAYMENT ON ACCOUNT (POA) rules govern the amount and timing of tax payments under self-assessment.
Each PAYMENT ON ACCOUNT is based on 50% x LAST TAX YEAR’S RELEVANT AMOUNT.
RELEVANT AMOUNT = LAST YEAR’S INCOME TAX + CLASS 4 NICs – AMOUNT ALREADY TAXED AT SOURCE
|PAYMENT ON ACCOUNT (POA)|
|1ST POA||31 JAN IN TAX YEAR||50% x LAST YEAR’S (INCOME TAX + CLASS 4 NICs – AMOUNT TAXED AT SOURCE)|
|2ND POA||31 JULY AFTER TAX YEAR||50% x LAST YEAR’S (INCOME TAX + CLASS 4 NICs – AMOUNT TAXED AT SOURCE)|
|BALANCING PAYMENT||31 JAN AFTER TAX YEAR||THIS YEAR’S TAX DUE – (1ST AND 2ND POA)|
CAPITAL GAINS TAX (CGT) and CLASS 2 NICs are due on 31 JANUARY AFTER THE TAX YEAR, at the same time as the BALANCING REPAYMENT.
The timing of PAYMENTS ON ACCOUNT (POA) and BALANCING PAYMENTS (BAL. PAY.) means that the BALANCING PAYMENT for one tax year is paid at the same time as the 1ST POA for the following tax year. For example, as shown below, on the 31 JANUARY 2021 a taxpayer will need to pay the BALANCING PAYMENT for tax year 2019/20 AND the 1ST POA for the following tax year 2020/21.
|31 JANUARY 2020||1ST POA|
|31 JULY 2020||2ND POA|
|31 JANUARY 2021||BAL. PAY.||1ST POA|
|31 JULY 2021||2ND POA|
|31 JANUARY 2022||BAL. PAY.||1ST POA|
|31 JULY 2022||2ND POA|
|31 JANUARY 2023||BAL. PAY.|
There is no requirement to make PAYMENTS ON ACCOUNT when;
- The RELEVANT AMOUNT for the previous tax year is less than £1,000 or,
- 80% of the INCOME TAX and CLASS 4 NICs due are paid by deduction at source.
Most people in employment do not make PAYMENTS ON ACCOUNT because more than 80% of their INCOME TAX and CLASS 4 NIC’s (if they have any) are paid through PAYE.