If you’re a contractor in the UK, and you need to make payment on account to HMRC through self assessment, it is important to make the second payment before 31 July 2012.
Payments on account are payments towards the following tax year’s income tax, class 2 or class 4 National Insurance bill. As a contractor this will affect you if your tax bill is more than £1000 or if less than 80% of your income tax is deducted at source, for instance through PAYE. These payments are made twice a year – 31st of January and 31st of July, and each payment is half of your previous year’s tax bill.
As an example, if your tax bill was £2000 for the 2010/11 tax year, then you should have paid £1000 in January and will make another payment of the same amount now.
If you end up paying too much, HMRC will refund the difference, either by cheque, bank transfer or as a reduction on your next tax bill.
Should your circumstances change next year (for instance your earnings increase dramatically) and you end up paying too little this year, the extra amount will be added to your next tax bill.
Do ensure that you make your payment in time, so you can avoid the immediate penalty of £100 and anysubsequent penalties.
If you have any questions or need help with your payments on account, please visit www.1stcontact-accounting.com or call 0808 141 1624 to speak to one of our professional consultants.