Act now to make the correct payments on account by 31 July

Is there scope to reduce your 31 July tax payment on account?

While the POA regime undoubtedly serves its purpose, if your liability has decreased compared to the previous year, the level of your 31 July tax payment may not be appropriate and may result in an overpayment of tax. There are several reasons why this may be the case, such as a fall in untaxed earnings or profits or an increase in tax reliefs. If this is the case, it may be sensible to reduce your 31 July tax payment on account.

What happens if you over-reduce your payments on account?

There is a cost to taxpayers who over-reduce their POA. HMRC will charge interest at the official interest rate (currently 8.5% per annum as of April 2025), on the amount underpaid. In cases where POA are reduced without substance or for those who consistently make claims which over-reduce their POA, HMRC can additionally charge a penalty. 

What should you do?

The good news is that you have four months between the end of the 2024/25 tax year and 31 July 2025, a period in which you can accurately calculate the tax due for 2024/25. By collating your 2024/25 tax return information as soon as possible, we can help determine your tax liability and make a claim to reduce the upcoming 31 July payment to match what you actually owe.

It should be noted that where your Income Tax liability for 2024/25 will be more than in the previous year, there’s no obligation to increase your 31 July payment on account unless a claim to reduce the 2024/25 payments on account has already been made, in which case the original payments should be made.

Need more time to pay your payments on account? 

The recent inflationary environment has put a strain on people’s finances and the last thing that anyone needs is to come up with the funds to settle another large bill within a short period of time. If you cannot pay your POA in full by the 31 July deadline - and you meet certain criteria - you could potentially agree a time to pay arrangement (which can, in some cases, be interest free) and spread the cost over a longer period, typically 12 months, which would make things more manageable. It is better to approach HMRC in advance of the payment deadline, rather than liaising with them on or after the date that the tax is due.

For professional assistance with the preparation of your 2024/25 tax return to establish the scope of reducing your payments on account, please fill out the form below and one of our tax specialists will be in touch to discuss your requirements and how we can help.