If you have to complete a personal tax return, you will pay both your (Income) Tax and National Insurance in that return.
The key dates
The personal tax year runs 6th April – 5th April the following year.
You pay the Income tax and National Insurance from on the income and profits declared in a return.
This return is due by 31st Jan following the end of that tax year.
If your accounting year is the same as the tax year, your profits from 6th April 2018 -5th April 2019 will go on your 2019 personal tax return, with tax and national insurance due by 31st January 2020.
But what if my accounting year is different to the tax year?
Sometimes it is possible for you to have an accounting year that isn’t in line with the tax year, in which case you pay profits from the year that ended in that personal tax return year.
For example if your year end falls between from 6th April 2018 -5th April 2019, your profits for that year will be taxed in your 2019 personal tax return.
So if you had a 30th April 2018 year end, the profits for that year will be taxed in your 2019 return.
Due to how strange this can feel, we suggest to clients their accounting year be as close to being inline with the tax year as possible! (so often 31st March is a good date to pick).
Paying on account
If you owe over £1000 in tax for any one year, in most cases you will be asked to pay ‘on account’ (up front) for the next tax year.
HMRC presumes you will earn the same amount again and the amount due will be the same amount of personal tax you have to pay this year, divided into two payments.
For example, on the 31st Jan 2020 you owe £1200.
You would be asked to pay £1800 on 31st Jan 2020 (£1200 for the 18/19 tax year year, plus £600 up front for 19/20) and then £600 on 31st July 2020 (the second £600 for 19/20).
If you’re not prepared for it, it can be quite a lot of money to find without much notice!
However, when you come to pay your next tax bill (and amounts up front) in 2021 you will have paid £1200 towards it.
If you have questions for how this might affect you, or what happens if you think you’ve overpaid in one payment, and what this means for the second, then do just get in touch.