Background
Taxpayers registered under Self Assessment will need to make their second payment on account for the 2024/25 tax year by the deadline of 31 July 2025.
HM Revenue & Customs (HMRC) generally issue Self Assessment statements as a reminder of the payment they are required to make by 31 July and individuals will recently have started receiving these in the post. However, it is important for taxpayers to be aware that even if they have not received a statement they are still required to make a payment on account where one is due. Taxpayers should check whether they are due to make a payment on account as soon as possible in order to avoid missing the deadline and incurring unnecessary interest.
Detail
The normal due date for paying income tax and class 4 national insurance contributions (NIC) under Self Assessment for a tax year is 31 January after the end of that year. However, some taxpayers need to make a payment on account on 31 January during the tax year and on 31 July immediately after the end of the tax year.
If you are a Self Assessment taxpayer, you are required to make payments on account to HMRC unless you fall under one of the following two categories:
- Your last Self Assessment tax bill was less than £1,000; or
- 80% or more of your tax was deducted at source through PAYE.
The second payment on account of 2024/25 for those relevant taxpayers is based on 50% of an individual’s combined Self Assessment tax and class 4 NIC liability for the 2023/24 tax year. The deadline for making this payment is 31 July 2025, and interest is charged on any late payment. The interest rate charged by HMRC on late payments is currently 8.25%.
Many taxpayers often rely on receiving their Self Assessment statement from HMRC as a reminder of their July second payment on account. However, taxpayers should be aware that even if they have not received a statement they are still required to make a payment on account if one is due. Therefore it is important that taxpayers check whether they are due to make a payment on account as soon as possible in order to avoid missing the deadline and incurring interest on any late payment. We will be happy to assist any clients who may want to confirm if they have a second payment on account falling due.
Self Assessment taxpayers may be able to reduce their second payment on account in certain circumstances and there can be beneficial cash flow opportunities where the actual liability for 2024/25 is likely to be significantly different to 2023/24.
2024/25 liability is lower than 2023/24
Where an individual’s taxable income has decreased compared to 2023/24, after deducting the January and July 2025 payments on account tax will have been overpaid. There is no legal requirement to alter the July payment on account, and HMRC will be happy to hold on to the overpayment until the actual liability has been established. HMRC will repay any tax overpaid plus interest (the current rate is 3.25%) once the individual’s tax return has been submitted.
Where an individual believes their liability will be less however a formal application can be made to HMRC to reduce their July payment on account. It should be noted that where a claim to reduce payments on account is made then any subsequent balancing tax payment will be subject to interest from the original payment on account due dates.
2024/25 liability is higher than 2023/24
Where an individual’s taxable income has increased compared to 2023/24, after deducting the January and July 2025 payments on account there will be a balance owing to HM Revenue & Customs. This additional liability is not required to be added to the July 2025 payment on account, and HMRC will not request that it is. The balance is not in fact due until 31 January 2026, effectively providing 6 months interest free credit.
If you would like a reminder as to whether you are due to make a payment on account by 31 July 2025, or on the possibility of reducing your payment on account, please speak to your usual contact at the firm.
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