‘Payments on account’ are advance payments towards your tax bill.
You have to make 2 payments on account every year unless your tax bill is under £1,000 or you have 80% of your tax collected through PAYE.
Each payment is 50% of your previous year’s tax bill. Payments are due by 31 January and 31 July.
You are entering the 'payments on account' system for the first time.
Your tax bill for the 2021-22 tax year is £4,000. You would need to pay £4,000 to HMRC by 31 January 2023, and the 1st payment on account for the 2022-23 tax year of £2,000 would also be due by 31 January 2023.
Total payment due 31 January 2023 = £6,000 (£4,000 + £2,000).
The 2nd payment on account of £2,000 would be due 31 July 2021.
When we prepare your 2022-23 tax return, we will then know your actual 2022-23 tax bill.
If your 2022-23 tax bill is higher than £4,000, then you pay a balancing tax payment by 31 January 2024 or if your 2022-23 tax bill is lower, HMRC will issue a refund straight away on submission of your tax return.