Payments on account

In this lesson

1. 0:00 Payments on account explained
2. 1:56 Claiming reductions on payments
3. 3:02 Penalties and interest for underpayments
4. 4:43 Worked example: Jane's tax calculation
5. 7:46 Interest and penalties illustration

About this lesson

The session walks you through the two payment dates each year, explains the relevant amount calculation, and shows you how to handle late payments and penalty scenarios with worked examples. Payments on account are advance payments of income tax and Class 4 National Insurance made by self-employed and other taxpayers during and after the tax year. You'll discover that these payments are typically 50% of the previous year's tax liability (excluding tax deducted at source), with payments due on 31 January during the tax year and 31 July after it ends. The session clarifies when no payments are required—if your tax bill is under £1,000 or more than 80% is covered by PAYE deductions—and explains the strict conditions for claiming a reduction. The video includes two detailed illustrations showing real calculations. The first walks through a complete balancing payment and first payment on account scenario, demonstrating how to separate income tax from capital gains tax and calculate the correct amounts. The second illustration covers interest and penalties for late payments, showing you exactly how HMRC charges interest from the due date and applies penalty percentages when payments are overdue. By the end, you'll be confident calculating payments on account scenarios quickly under exam conditions and understanding the financial consequences of late or incorrect claims.

Duration: 9m