Payments on account 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.

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 relevant user 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. If you have not completed the first Self Assessment return in your FreeAgent account, please see below for more details.

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

If you want to pay your tax in lump sums in January and July (instead of 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.

For example, if you’re preparing your 2021/22 tax return 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.

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 Tax Timeline or at the bottom of the Your Tax Breakdown page. You can mark these as paid once you've paid HMRC.

Previous year’s Self Assessment not filed through FreeAgent

Payments on account can only be manually entered in the first return that FreeAgent generates, within the ‘Your Tax Breakdown’ page.

If you have not completed the first Self Assessment return in your FreeAgent account, you’ll not be able to manually enter payments on account for the following year.

Therefore, FreeAgent will only calculate the payments on account for the second and subsequent returns automatically based on the data entered into the account for the prior Self Assessment period.

If you have payments on account to enter for the second Self Assessment tax return, and have not completed the first Self Assessment in your FreeAgent account, you’ll still be able to file your tax return through FreeAgent. This is because we don't submit the information about historic payments on account to HMRC as HMRC do not require this because they know how much they have received on account.

The only liability figure that HMRC needs with each tax return is the total tax and NIC due for that year, which will be correct in FreeAgent, so long as you have entered all your information for that year correctly.

Unfortunately your balancing payment for your second Self Assessment return on the FreeAgent Tax Timeline will not match what is actually due, so you need to double-check in your online HMRC account how much you should pay by 31st January of the following year.