Self-assessment and the July deadline

by Michael Blaken

If you’re a taxpayer in self-assessment, then you have an important deadline on the horizon. Your second income tax payment on account for 2023/24, is due on 31^st July 2024.

This payment will be based on what you paid in the last tax year, ending 5^th April 2023. You will already have made one advance payment, in January 2024, and both these payments are taken into account when calculating what you might still owe for 2023/24, which will be finalised following submission of your tax return, no later than 31^st January 2025.

Self-assessment tax and new businesses

Business owners sometimes get caught out by not putting money aside for tax as they go along. Here’s why:

If you started a new business in April 2023, you won’t need to pay any tax until January 2025 – 22 months later!

However, at this point you must pay a year’s worth of tax and national insurance on income earned from April 2023 until April 2024. Plus, you must pay six months’ tax on account, towards your liability for 2024/25. In other words, you will need to pay 18 months’ worth of tax, all in one go, by 31^st January 2025 (but remember you have had 22 months of income to cover this tax bill)

On July 31^st 2025, you then have to make another payment on account. Essentially, at this point you have completed the 2024/25 tax year and earned a further 4 months into the next tax year, so you should have the money to cover this tax bill.

So, remember, if you start your business in April ’23, even though you don’t need to pay any tax for 22 months, you are still incurring a tax liability as you earn – it’s just not due for payment yet.

Penalties for late payment

If your payment on account isn’t made by or on 31^st July , then interest will start to accrue on the unpaid amount from 1^st August.

If you feel your income from all sources is lower than in the previous tax year you can reduce the payment due.

However, bear in mind that if you do elect to reduce the payments and the final liability is higher you may end up paying interest on the difference between the reduced and actual figures.

So, if you think your income fell in the year to 5^th April 2024, bring your tax return information in and let us calculate it accurately, rather than guessing and leaving it till the deadline in January.

For help with personal and business tax, please get in touch with the team at Optimum.