Payment of tax and national insurance

For most taxpayers, income tax is paid at source on their earnings or investment income. If, however, you receive income from which tax has not been deducted or if your total income exceeds the basic rate band limit Details of which can be found on our website and which change annually), you will have higher rate tax to pay. When your tax return is completed, your income is added up, your allowances are deducted and the tax is calculated. From that total tax bill any amounts you have paid at source are deducted and any difference is payable to the Inland Revenue (or is refunded if payments on account exceeded your liability).

It may be possible for any balance of tax due for a particular year to be paid by adjusting your notice of coding for a subsequent year. Otherwise, you have to pay that balance no later than 31 January after the end of the relevant tax year.

If your tax liability in one year is high enough you may also have to make payments on account.  These are payable in two instalments, the first on 31 January in the tax year and the second on 31 July after it. So, for example, if you are required to make payments on account for the tax year to 5 April 2009, the first one is payable on 31 January 2009 and the second on 31 July 2009.  It is possible to reduce payments on account but if you do so and it turns out that they were correct in the first place, interest will arise. So, we recommend reducing payments on account only where you can be reasonably certain that your income will drop in the next tax year.

Interest is payable on tax paid late and a surcharge applied if you fail to pay the tax for a particular tax year before 28 February in the following year. Penalties can arise if your tax return is not filed by the relevant deadline.

It is part of our standard service that we calculate your tax liability for you so that this means that the deadline for filing the self assessment return online is 31 January after the end of the tax year.  Paper returns must now be filed by 31 October after the end of the tax year.

The self-employed also pay Class 4 national insurance at the same time as they pay their income tax.

Any CGT for a particular year is payable by 31 January after the tax year.