If you have never worked for yourself as a sole trader before, you will probably not be familiar with the term payment on account.
As an employee, your tax on earnings is collected through PAYE. Your employer will deduct the income tax and national insurance before paying your salary to you.
As a sole trader, your first tax bill is due on 31 January after the end of the tax year. If you started to trade in the 2016/17 tax year (between 6 April 2016 and 5 April 2017) your first tax bill was due on 31st January 2018.
Understanding your tax bill…
Your first tax bill due on 31st January 2018 was effectively 150% of the tax you calculated for Self Assessment: the tax bill for 2016/17 and an additional 50% payment on account to go towards the tax bill for 2017/18.
Your second tax bill will now be due on 31 July 2018 and it will be another 50% payment on account to go towards the tax bill for 2017/18.
Do you have to make a payment on account?
As a sole trader, you have to make 2 payments on account to go towards next year’s tax bill: on 31 January and 31 July… unless:
- your last Self Assessment tax bill was less than £1,000
- you have already paid more than 80% of all the tax owed
Do you need any help with your Self Assessment? Get in touch with us now: https://beeaccountancy.co.uk/contact
*This information is correct at time of posting but may change with changes in HMRC legislation*