There is a second tax payment deadline for many independent contractors
It's critical to pay your bill on time because late payments incur an interest rate of 8 percent.
For the 2024 - 2025 tax year, self-assessment taxpayers have less than two weeks to make their second payment on account or risk significant penalties and interest.
Employees are required to pay on account by midnight on January 31 and July 31 of each year.
All self-employed people are subject to the deadline, unless they owe £1,000 or less (since this can be paid in full on the first tax return) or have already paid more than 80% of their tax liability.
Claire Trott is the head of St. Jamess Place states: "Taxpayers must verify their debts and make sure they pay on time to avoid penalties as there are less than two weeks left before HMRC's second self-assessment payment deadline on July 31.
Describe payment on account.
It is necessary for many independent contractors to make two account payments annually. Based on past tax years, HMRC calculates the likely amount of your tax bill and divides it into two installments.
Your first payment on account for the 2024 - 2025 tax year must be made on January 31st, in addition to your tax bill for the 2023 - 2024 tax year. By July 31st, the second payment on account must be made.
If you think your income will decline and you will therefore be responsible for a lower tax bill, you can ask to have your account payments reduced.
It is possible to pay the tax online with a corporate credit card or debit card, or by bank transfer, direct debit, or postal check; however, it is best to plan ahead so that no transfers are received after the deadline.
If you are still receiving paper statements from HMRC, you can also pay at your bank or building society.
Penalty interest rates are rising.
Paying your outstanding taxes by July 31st is more important than ever because HMRC recently increased the amount of interest it charges on income tax that is not paid on time.
The late payment interest rate first jumped to 8 percent, the highest level since August 2007, when the government raised it to 4 percent plus base rate in April 2025. In light of the most recent interest rate cut by the Bank of England, the rate dropped to 8 percent at the end of May and has remained there.
Previously, the interest rate on late payments was set at 2.5 percent above the base rate.
A Freedom of Information request filed by financial advising firm NFU Mutual revealed that the tax authority's interest receipts for past-due payments increased from 147 million in 2021 - 2022 to 252 million in 2022 - 2023.
According to NFU Mutual's chartered financial planner Sean McCann, "the interest rate on late tax payments increased to 8 percent in April. Even though the base rate was recently lowered, late-paying taxpayers still face a hefty interest rate of 8.25 percent.
"This increase makes it even more important to pay your taxes on time because late payment interest starts to accrue every day from the date the payment is due.
Trott continues: "People must check their self-assessment accounts immediately and take action before the July 31 deadline, considering the possible costs of a delay. Long-time independent contractors are probably aware of these due dates, but they can still easily catch up to those who have just filed their first return of the year.
Is it necessary for me to submit a self-assessment tax return?
It is anticipated that 12 million people will submit self-assessment tax returns annually. Even though filing taxes is typically thought of as something that self-employed people must do, many people who work regular jobs must also do so.
The main determinant is whether you receive income that is exempt from source-level taxes. Because of this, in addition to self-employed people, people who earn money from real estate rentals or who have substantial investments (that aren't held in an ISA) will also need to file a return.
Those who make money from the sale of an asset or who receive income from overseas will also have to pay capital gains tax.
Other examples include individuals with incomes over £60,000 who must repay a portion of their child benefits and higher- or additional-rate taxpayers who wish to receive additional tax breaks on their pension contributions.
Four percent of tax return filers file on paper, compared to about 97 percent who file online.
Enrolling in order to submit a self-assessment tax return.
To submit a self-assessment tax return, you must first register with HMRC. For the upcoming tax year, this must be completed by October 5th.
You will receive a unique taxpayer reference via postal mail after completing this online via the Gov . uk website. You will also receive activation information for the Governments Gateway platform, which is used to file online tax returns.
Starting the registration process as soon as possible is a good idea because this process can take up to three weeks.
Paying your tax bill and submitting your self-assessment tax return.
If you are filing your self-assessment tax return online, you have until January 31 to pay your tax bill.
The prior tax year is the subject of this deadline. Thus, the deadline for filing your tax return and paying your bills for the 2024 - 2025 tax year is January 31, 2026.
Those who file their taxes on paper must submit them by October 31st, even though the deadline for paying any taxes owed is still January 31st.
Following the completion of your tax return and the notification from HMRC of your tax liability, you have a few options for paying your tax bill.
Although there are a number of options, many taxpayers choose to pay the entire amount due in one lump sum. For instance, you could use a debit card to make a single payment. You could also use a corporate credit or debit card, but there would be a fee.
The payment can be made to the HMRC bank account via your online banking service. Additionally, you have the option of mailing a check to HMRC or paying at the local branch of your bank or building society.
It's advisable to make the payment ahead of time because these payments may take a few days to process.
Paying at the Post Office is no longer an option.
LATE TAX RETURN PENALTIES.
If you fail to pay your bill on time, you will be assessed additional fines. If you file your tax return late, you will be assessed a 100 penalty fine.
If you are more than three months past due, this penalty is increased. In addition, you will be required to pay interest on the outstanding balance.
According to McCann: "Normally, a penalty of 5% of the tax owed is assessed 30 days following the due date.
"Any tax that is still owed twelve months after the due date is subject to an additional five percent penalty, and sums that are still owed after six months are subject to an additional five percent penalty.
HMRC has stated that it will not penalize you for "honest" errors. If you wish to contest a penalty for filing your taxes after the deadline, you may do so by citing a number of reasons, such as the passing of a close relative, a period of hospitalization, or a computer malfunction.
To find out if a repayment plan can be established if you are unable to make the payment, get in touch with HMRC right away.
Is there anything I should do if I file my tax return incorrectly?
You have 72 hours to fix any errors on your tax return. If you file your return online, you can do this through the Gateway platform; if you file your return by mail, you can download a new form to complete. Each page must have the word "amendment" written on it.
You will have to write to HMRC after this date to explain any mistakes you made. The reason you believe the incorrect amount of tax was paid and the amount you either owe or should receive back must be made clear.
You have up to four years from the end of a tax year to request a refund.
Costs associated with self-employment.
When submitting your self-assessment tax return, you might be able to deduct specific costs, which would reduce the amount of your tax liability.
Travel expenses like train fares or office expenses like stationery or computer equipment may fall under this category.
Importantly, you cannot claim expenses for a laptop that you use for leisure purposes; instead, they must be related to the work you do.
Should you work from home, you might also be eligible to deduct a portion of your energy bill and other household expenses. Instead of deducting the full amount, you will need to determine the percentage of your energy consumption that is attributable to your work.
The simplified expenses scheme, which enables self-employed individuals to claim a flat rate, is a simpler choice. This depends on how many hours they work from home each month, which can be anywhere between 10 and 26. You must work from home for at least 25 hours each month.
THE CHARGE FOR HIGH INCOME CHILD BENEFIT.
In order to pay the High Income Child Benefit Charge, some individuals must file a self-assessment tax return.
The tax is imposed on those who make over £60,000 annually and serves as a taper, gradually reclaiming the child benefit that these high earners were entitled to.
Effectively, the benefit is taken out at a rate of 1% for every £60,000 that the higher-income partner earns annually. Thus, when the higher-income partner's adjusted net income hits £80,000 annually, the child benefit is completely withdrawn.
Even if the partner who receives the child benefit payments is not the one who pays the High Income Child Benefit Charge, they are still accountable for paying it.
What are my options if I'm having trouble paying my tax bill?
Trott at St. Jamess Place, it's critical to get in touch with HMRC right away if you find yourself unable to make your payments.
She says: "Although it could be tempting to put off or overlook the problem, HMRC does take into account valid justifications, and getting in touch as soon as possible gives you the best chance of avoiding increasing fines.
"This is also a good time to consider how to be more prepared moving forward, whether that's setting aside money on a regular basis or setting up a Budget Payment Plan with HMRC, if you were caught off guard by this month's deadline of July 31 for payments on account.
For some taxpayers, a Time to Pay arrangement may be an option if they are unable to pay the bill in full. For some, this can be completed online, but in others, you might need to speak with HMRC employees directly about your needs. Time to Pay, as the name implies, lets you pay the bill in installments over a longer period of time.
In order to determine how much money you have left over each month after paying for necessities like food and utilities, HMRC will investigate your financial situation. Your ability to pay the bill can then be determined.
The bill can be paid using their tax code for certain taxpayers. Not everyone has this option; you can only do it if you owe less than £3,000 and already pay taxes through pay as you earn (PAYE), such as if you work in some capacity rather than being a self-employed person. Additionally, you must file your taxes online by December 30th or on paper by October 31st.
Last but not least, Trott indicated that by establishing a Budget Payment Plan, it is feasible to make consistent payments toward the tax bill for the following year. Paying for your next bill is the goal of such a plan, which you can use either weekly or monthly.
When you actually file your tax return, you can either top up the payments to pay off the amount you owe or claim a refund.
It's critical to record your UTR for each of your self-assessment tax return payment options. You must write this on the back of the check or include it as a reference, for instance, when paying online. It is therefore easy for HMRC to determine which tax bill the funds are intended for.
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