Tax payment date on the horizon for taxpayers
Thursday, 24 June 2021
We’re fast approaching another key date in the self-assessment tax year; 31 July is when some taxpayers are required to make their second tax payment on account towards their income tax liability for the year ended 5 April 2021.
Whilst many taxpayers put off preparing their tax return, there are often advantages to filing your tax return early, not least the peace of mind that the job is done and dusted for another year.
Advantages of early filing
Even if you file your tax return early with HMRC, you don’t have to pay the tax earlier. In fact, early filing can sometimes reduce your July tax bill and, even better, accelerate any tax repayments. Failing that, at least you know that the payment being demanded is due in full, which helps with cashflow management.
The payment on account which is due on 31 July has been calculated based on your tax position for the previous year i.e. the year ended 5 April 2020.
Often people’s circumstances will change, even more so in recent times with the impact the pandemic is having on taxpayers. If your affairs have changed this year, such as a reduction in income, or more tax relief might be due as you’ve increased your pension contributions or invested in tax favoured investments, it really does make sense to file your tax return sooner rather than later. This will enable the payment on account to be recalculated and you may get a reduced tax bill.
What about Capital Gains Tax?
Capital Gains Tax is ignored for the purpose of payments on account, so you don’t need to worry if you’ve potentially sold assets and made a profit. Any Capital Gains Tax would not be payable until 31 January 2022.
What if I wait until HMRC demand payment?
If you don’t file your tax return early, the July payment on account will have to be paid in full as demanded. You’ll then have to wait for HMRC to process any refund that might be due, which can sometimes take a few weeks.
As you get closer to the next payment date of 31 January 2022, HMRC would hold back the refund and automatically offset it against the next year’s tax liability.
We can help
The message is, therefore: do not delay! Move your tax return up the to-do list and get in touch with your Larking Gowen advisor as soon as possible, who would be happy to assist.