Here we explain how payments on account work in FreeAgent.
Payments on account are payments that some individuals are required to make towards their next year’s income tax and class 4 National Insurance bills. Here's how payments on account work in FreeAgent.
Payments on account in your FreeAgent tax return
When you fill in your tax return in FreeAgent, you’ll see that it works out your payments on account for the next tax year and displays this figure in box 11 on the Tax Adjustments page.
So if you’re preparing your 2016/17 tax return (the return that covers the tax year that runs to 5th April 2017), FreeAgent will show you how much you can expect to pay on account for 2017/18.
Reducing your payments on account for next year’s FreeAgent tax return
If you are advised by your accountant that you can reduce your payments on account for the next tax year, you can change the figure on the Tax Adjustments page of your FreeAgent tax return.
If you’re preparing your 2016/17 tax return, for example, and your accountant advises that you can reduce your payments on account for 2017/18, you can set box 10 to ‘yes’ and change the figure in box 11 on the Tax Adjustments page.
Bear in mind that if you reduce this figure too far, HMRC
will charge you interest on a late payment of tax, so always seek your accountant’s advice first!
Finding out what you owe and when
In FreeAgent, you can see how much tax and class 4 National Insurance you owe on either the Overview screen Tax Timeline or at the bottom of the ‘Your Tax Breakdown’ page. Make sure you’re looking at the correct year, as the dates can sometimes be confusing!