Update on 31 July 2020 Payments On Account

Payments on account’ are advance payments towards your tax bill  and many taxpayers have to make 2 payments on account every year unless:

  • your last Self Assessment tax bill was less than £1,000
  • you’ve already paid more than 80% of all the tax you owe at source (normally by PAYE)

Each payment is half your previous year’s tax bill. Payments are usually due by midnight on 31 January and 31 July.

Because of coronavirus (COVID-19), HMRC have confirmed that you can delay making your second payment on account normally due 31 July 2020.  If you choose to delay, you’ll have until 31 January 2021 to pay it.

This is deferral, therefore if you still have tax to pay for the 2019/20 tax year after you’ve made your payments on account, a ‘balancing payment’ will be due by 31 January 2021.

This is an automatic offer and no application is required.

The original notice from HMRC was unclear, however HMRC has now confirmed to the ICAEW that the deferral applies to all tax payers. It is not necessary to be self-employed to be eligible for the deferral. 

The deferral is optional - some taxpayers may prefer to make the July payment to avoid a larger payment in January 2021.

If unusually you have set up a direct debit mandate for the payment on account due on 31 July 2020 you should cancel it by contacting the bank.

Self assessment returns should still be filed by their due date and it may be advantageous to file the 2019/20 return as soon as possible after 5 April 2020. This might facilitate planning for the tax payment due in January 2021 and perhaps crystallise any refund due, including as a result of any loss relief available