How payments on account work in FreeAgent

This article explains 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.

Please note that FreeAgent's Self Assessment functionality won't be available if you have an unincorporated landlord account.

Payments on account in your FreeAgent tax return

Navigate to the ‘Taxes’ tab at the top of the screen and select ‘Self Assessment’ from the drop-down menu.

Select the appropriate Self Assessment tax return from the list of tax years on the left-hand side.

Select the ‘Tax Adjustments’ tab.

FreeAgent will work out your payments on account for the next tax year and display this figure in box 11.

For example, if you’re preparing your 2021/22 tax return (the return that covers the tax year that runs to 5th April 2022), FreeAgent will show you how much you can expect to pay on account for 2022/23.

If you want to make payments on account, you’ll need to complete the ‘Underpaid tax’ section on the ‘Main Return’ page.

To do this, select the ‘Main Return’ tab.

If you want to pay your tax in lump sums in January and July (as opposed to asking HMRC to change your tax code to collect it from your salary or pension), make sure that all three boxes are ticked as ’Yes’ in the ‘Underpaid tax’ section.

If you're unsure which boxes you should tick here, please ask your accountant.

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 2021/22 tax return, for example, and your accountant advises that you can reduce your payments on account for 2022/23, 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, and mark these as paid. Make sure you’re looking at the correct year, as the dates can sometimes be confusing!