When do I pay my tax?

When do I pay my tax?

The income tax year, or fiscal year as it is known, runs from 6 April to 5 April. Your liability to income tax and class 4 national insurance for the tax year is normally paid by two equal instalments (interim payments) paid on 31 January, prior to the end of the tax year, and 31 July, following the end of the tax year. If this does not settle the tax liability in full, then a balancing payment is due for payment on the following 31 January.

The interim payments are based on your liability for the previous year. If the actual liability turns out to be higher than that of the previous year, this is when a balancing payment arises. Conversely, if the liability is less than the previous year then you will receive a tax repayment, together with interest.

If you are able to anticipate a fall in income, you can apply to HM Revenue & Customs to reduce your interim payments.

You must take extra care in the opening years of your profession. As the interim payments are based on the previous year’s tax liability, if you do not have a liability in the previous year then no interims are payable and the full amount of the tax falls due to be paid as a balancing payment on 31 January. At the same time you need to make your first interim payment for the following year. This could come as quite a shock unless you make provision for your tax as you go along.

Also, as your fees increase in the early years of your profession, you will experience a pattern of large January payments and lower July payments because of the doubling up effect of balancing and interim payment on 31 January. If your income rises steeply, this doubling up effect can be quite dramatic. Again, it is essential that you make proper provision for your tax as you go along.

This answer was last checked May 2017. This answer is for general guidance only. It provides an outline, and may not include points which are important in your case. You should not rely on this answer without taking individual advice based on the full facts of your case. The information given was correct at the time of release.