Setting up a limited company. As the Director when do you need to pay your payments on account?
As a director of a Limited company you will be asked to complete a Self Assessment Tax Return. This return will calculate your overall tax liability, based on all sources of income and will give credit for any tax that has already been paid and deducted at source. Any balancing tax liability will be due by 31 January following the end of the tax year to which it relates.
If your balancing tax liability is over £1,000, HMRC will ask you to make a Payment on Account of the following years liability. If asked to make such payments, these will be due by 31 January and 31 July. Each payment is half of the tax due for the previous year.
No payments on account are required in respect of capital gains tax liabilities or Student Loan repayments.
Payments on account will not be necessary, even if your liability is in excess of £1,000 if more than 80% of your tax is collected at source.
If you know that your income for the current year will be lower than last year's, you can ask to reduce your payments on account.
You can reduce your payments on account in any of the following ways:
- Make a claim on the calculation pages of your tax return
- Sign on to HMRC Online Services and make a claim online
- Download, complete and send form SA303
If you do ask to reduce your payments on account beware:
- If you pay less than you need to, HMRC will charge you interest
- HMRC may ask you to pay a penalty too if they think you haven't taken reasonable care in requesting the reduction
For more information please contact one of our dedicated and friendly contractor accountants at Genie Accountancy who would be more than happy to help with any queries you may have.
