Personal Tax - When is Income Tax and Capital Gains Tax Payable?

Under self assessment an individual is responsible for ensuring that their tax liability is calculated and any tax owing is paid on time. 


We summarise the tax payment rules and penalties for failing to pay on time. If you live in the Wymondham area we, at NSBA Ltd, can prepare your tax return on your behalf and advise you on payments that may need to be made to HMRC.



Scope

The UK income tax system requires the payer of certain sources of income to deduct tax at source which removes the need for many taxpayers to submit a tax return or make additional payments. This applies in particular to employment income. Interest is now received gross of tax but the savings allowance removes most taxpayers from the need to pay tax on such income. However deduction of tax at source is not possible for the self employed or if someone has substantial investment income. As a result we have a payment regime in which the payments will usually be made in instalments.


The instalments consist of two payments on account of equal amounts:


the first on 31 January during the tax year and

the second on 31 July following.

These are set by reference to the previous year's net income tax liability (and Class 4 NIC if any).


A final payment (or repayment) is due on 31 January following the tax year.


In calculating the level of instalments any tax attributable to capital gains is ignored. All capital gains tax is paid as part of the final payment due on 31 January following the end of the tax year.


A statement of account similar to a credit card statement is sent to the taxpayer periodically which summarises the payments required and the payments made.


Sally's income tax liability for 2021/22 (after tax deducted at source) is £8,000. Her liability for 2022/23 is £10,500. Payments will be:


31.1.2023 First instalment (50% of 2021/22 liability) = 4,000


31.7.2023 Second instalment (50% of 2021/22 liability)=4,000


31.1.2024 Final payment (2021/22 liability less sums already paid)=2,500


£10,500



There will also be a payment on 31 January 2024 of £5,250, the first instalment of the 2023/24 tax year (50% of the 2022/23 liability).

How we can help


If you live in the Wymondham area we can prepare your tax return for personal tax self assessment on your behalf and advise on the appropriate payments on account to make. Please do contact us at NSBA Ltd for help.



Points to consider

  • Late Payment Penalties and Interest

    Using the late payment penalties HMRC may charge the following penalties if tax is paid late:


    A 5% penalty if the tax due on the 31 January is not paid within 30 days (the 'penalty date' is the day following)

    A further 5% penalty if the tax due on 31 January is not paid within 5 months after the penalty date

    Additionally, there will be a third 5% penalty if the tax due on 31 January is not paid within 11 months after the penalty date.

    These penalties are additional to the interest that is charged on all outstanding amounts, including unpaid penalties, until payment is received.

  • Nil Payments on Account

    Where there is only a modest amount of income tax due, after tax deducted at source has been accounted for, then the two payments on account will be set at nil. This applies if either:


    income tax (and NIC) liability for the preceding year - net of tax deducted at source and tax credit on dividends - is less than £1,000 in total or

    more than 80% of the income tax (and NIC) liability for the preceding year was met by deduction of tax at source and from tax credits on dividends.

  • Claim to Reduce Payments on Account

    If it is anticipated that the current year's tax liability will be lower than the previous year's, a claim can be made to reduce the payments on account. We can advise you whether a claim should be made and to what amount.

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