Self Assessment & On Account Payments

If you are a sole trader you have to file a self assessment tax return every year, either on paper or online.

Before you can file a tax return you must register as self employed, with HMRC here. When you register you can also request online access, if you didn’t do that at the time of registering you can do that here.

The tax year runs from 6th April – 5th April, for the purpose of this article we’ll use the 2016-17 tax year that runs from 6th April 2016 – 5th April 2017. The tax return for that year must be filed on paper by 31st October 2017 or online by 31 January 2018.

Once you have created your tax return (or had a bookkeeper do it for you!) and submitted it online you will need to pay your tax and national insurance liability by 31 January (the online filing deadline).

If your liability is over £1,000 you will also need to make 2 on account payments for the next tax year, when you pay for the current years liability. For example:

Your tax & NI liability for 2016-17 tax year is £1,200 and it’s due to be paid 31 January 2018.
Because your liability is over £1,000 50% of your 2016-17 liability needs to be paid on account towards your 2017-18 liability.
So, also on 31 January 2018 you’ll need to pay £600 on account for 2017-18. Making a total of £1,800 due 31 January 2018.
The 2nd on account payment is due 31 July 2018 for £600.

When the 2017-18 tax & NI liability is due you’ll need to make sure you deduct the 2 on account payment from the total, before paying over.

NOTE: If you submit your tax return yourself HMRC do not deduct these on account payments from the calculation screen at the end of the submission. However, if you submit your return before November you usually get a statement of account in January to remind you what you need to pay and this will take into account the on account payments.

If you’re in any doubt or would like any assistance we are happy to help! We have a product specifically designed for sole traders, all the information can be found here.

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