Tax tip: 14 December 2023

Anybody who has to complete a personal tax return should think about planning with respect to payments on account. This is especially so for sole traders whose income fluctuates on a year-on-year basis.

Let’s assume a sole trader uses the tax year itself as their accounting period a tax return for the 2023-24 tax year needs to be filed by 31 January 2025. The balancing payment for the 2023-24 tax year needs to be made on the same day as the first payment on account towards the tax for the following tax year 2024-25 being 50% of the income tax and National Insurance due for 2023-24.

At the point that this first payment on account is due the taxpayer will already know what their income was for roughly ten months of the 2024-25 tax year ie from 6 April 2024 to 31 January 2025. If...