Your tax bill is calculated based on your total taxable income for the year, minus any tax-free allowances and reliefs. Here are the main components you will see on your tax return:
Income Tax:
The personal allowance for the 2023/2024 tax year is £12,570. Income above this threshold is taxed at varying rates:
20% on income between £12,571 and £50,270.
40% on income between £50,271 and £125,140.
45% on income over £125,141 (personal allowance is tapered to zero for incomes above £100,000).
National Insurance Contributions (NICs):
If you’re self-employed, you may need to pay:
Class 2 NICs: £3.45 per week if your profits exceed £12,570.
Class 4 NICs: 9% on profits between £12,570 and £50,270, and 2% on profits above £50,271.
Capital Gains Tax (CGT):
If you sell an asset, such as property or shares, you may owe CGT on any profits above the annual £6000 exemption.
Payments on account
HMRC will ask you to make payments on account if your tax bill exceeds £1000, and less than 80% of the tax due is not collected at source. These payments on account go towards the next year's tax bill. You will pay two payments on account, one on January 31st alongside this year's balancing payment, and the second on July 31st.
Payments on account are calculated as two halves of the previous year's tax bill. For example, if your 2024 tax bill is £2000, £3000 will be due on January 31st (£2000 for 2024, and £1000 towards 2025's bill) and a further £1000 will be due on July 31st. If your tax bill for 2025 ends up being less than £2K, you may receive a refund for this overpayment.
This is why it's important to try and submit your tax return before the second payment on account is due, particularly if you think your tax bill will be lower than the previous year, as it will prevent you from unnecessarily overpaying.
Payment deadlines
The deadline to pay your balancing payment of tax due for the 2024 tax year is the 31st of January. This is also the deadline for the first payment on account for the 2025 tax year.
HMRC accepts payments towards your tax bill via:
Direct debit
Bank transfer
Telephone bank transfer
Debit card (this may be subject to fees)
At your bank
By cheque
Through your tax code
When making a payment, make sure to use the correct payment reference! This is your UTR number, followed by the letter K. If you are ever unsure, make sure to ask your accountant!
for more information on how to set up these payments, please visit HMRC's website: Pay your Self Assessment tax bill: Overview - GOV.UK
If you are unable to pay your tax bill on time, make sure you contact HMRC. You can arrange a payment plan within 60 days after the 31st of January deadline, which will allow you to pay your tax bill in monthly installments. You can set this up online via your government gateway account- Sign in using Government Gateway - Government Gateway - GOV.UK
I hope this short post helps you understand more about your tax bill. If you do have any questions not covered by this article, make sure to contact us!
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