If you are Self-Employed and file a Self-Assessment you may have already been hit with your first payment on account but if you haven't they can be a bit of a sting!
When your tax bill including your Class 4 National Insurance goes over £1000 you will have to make a payment on account. There are a few exceptions for example, you have paid more than 80% of the tax you owe through your tax code.
If your tax and Class 4 NI are over £1000 you will have to pay the same amount of tax again, in advance, towards next year's tax bill. The payment on account will be split into 2 payments of 50% of your tax bill.
Lets look at an example - say your tax bill is £2000 including Class 4 National Insurance.
By the 31st January you would need to pay your tax bill £2000 + a 50% payment on account which would be £1000 in this example
Total £3000 to pay by 31st January
By the 31 July (6 months later) you would then need to pay a further 50% - £1000.
You have then paid your tax bill for the previous tax period and also put the same again towards next years tax bill.
The payment on account will be used towards your next tax bill, you will then just have to pay the difference between your payment on account and your tax bill. If your tax bill is above the £1000 again you will need to continue to make payments on account.
Please get in touch if you have any questions or if you would like help to plan for your tax bill.