HEADS UP - HMRC Self Assessment: Payment on Account due 31 July

I find that tax is a matter that few artists become expert on as they are starting out - or sometimes at any point of their careers!

This is a HEADS UP for British artists! If you are 

• EITHER: self-employed as an artist 
• OR are employed AND earn more than £1,000 from your art, 

then you have a tax payment coming up! 

The deadline for your second payment on account is 31 July each year

HM Revenue & Customs (HMRC) requires individuals to make advance payments towards their next tax bill if you are self-employed or have untaxed income. (HMRC - Payments on Account)

How do "payments on account" work?

Payments on account based on your estimated tax bill and are 

• advance payments towards your next Self Assessment tax bill (including Class 4 National Insurance if you’re self-employed).
• split into two equal instalments due each year on 
• 31 January (final payment for previous year plus payment on account for current tax year) and 
• 31 July 
• Each payment is worth 50% of your previous year's total tax bill

So if you completed and submitted your HMRC Self Assessment Form by 31st January this year, then you know how much you paid in tax and hence how much you have to pay (ie half of less years' bill)

How payments on account are calculated

• Payments on account are calculated based on your estimated earnings (usually the amount you earned the previous year). Each payment is usually half of the tax you owed the previous year.
• If you actually earn more than estimated, you may still have tax to pay on top of your payments on account. This is known as a ‘balancing payment’.
• If you earn less than estimated, you may be able to claim a tax refund. (HMRC - Payments on Account)

Am I automatically exempt?

However, you are automatically exempt if either of the following apply:

• Your last Self Assessment tax bill was £1,000 or less
• 80% or more of your total tax is already deducted at source (e.g. through PAYE on an employment income)

If your income has dropped, then you can apply to reduce these payments via 

• your HMRC Online Account 
• or by submitting form SA303 to HM Revenue and Customs

How to pay HMRC

They spent a lot of money developing the HMRC app
- and they're rather keen you should use it

TIP Speaking personally, the only way I ever make a tax payment is via a device which allows me to print off the payment details and create a PDF for my tax files.

That way you then have a precise record of the date and time you made the payment - and how - should there be any dispute

You can pay HMRC via

• Direct Debit
• Approve a payment through your online bank account
• Make an online or telephone bank transfer
• By debit or corporate credit card online
• At your bank or building society
• By cheque through the post
• Pay weekly or monthly
• Through your tax code

REFERENCE

My "Art Business Info for Artists" website

• UK Tax Tips for Artists - Tax Tips for Artists | Art Business Info for Artists

HMRC

• Self Assessment - Includes filing, deadlines, pay and tax records | HMRC


• Paying your tax bill
• Pay your Self Assessment tax bill
• Understand your Self Assessment tax bill
• If you cannot pay your tax bill on time

Does HMRC's "Making Tax Digital" affect you?

Did you know how much you earn does not only affect how much tax you pay? 

In future, it is likely to affect HOW you (1) account for your gross income and (2) pay your tax. 

This is all part of the Making Tax Digital initiative of HMRC. This blog post is all about what's happened recently and what's coming - and whether you need to know more NOW!

I'm going to say upfront, if you are an amateur artist or a professional not earning very much from your art you have nothing to worry about - for the moment.

However those earning MORE than "not earning very much" MUST get to grips with Making Tax Digital soon. Plus note that they are focused on gross income and not net (more about this below)

Digital record-keeping will deliver time-saving benefits for taxpayers (HMRC)

IN THE NEAR FUTURE, I'm going to be developing a "Making Tax Digital page" in the Tax section of my Art Business Info website - alongside the existing UK Tax Tips for Artists to provide artists with links to useful info.

In the meantime, I'll be blogging about it on here for artists who need to get their heads around it.

Of course, as always (here comes the disclaimer), as law and related online content changes all the time,  I am totally unable to warrant that ANY and/or ALL information is complete and/or

• professional and/or
• up to date and/or
• wholly accurate and/or
• all links lead to the most current information (at the time of writing)

UNLESS I am quoting recent HMRC emails (see below) or HMRC websites with a recent date. 

YOU are solely responsible for making sure that you get the proper advice. Personally, I find the HMRC website provides everything most people need to know - but you do need to read it!

Making Tax Digital

As somebody who completes a self-assessment form each year, I received my Getting ready for Making Tax Digital (MTD) for Income Tax email from HMRC yesterday which very clearly states the timetable for the staged implementation of Making Tax Digital. 

I assume everybody else who makes a self assessment tax return for sole trader income also got the same email. So look in your inbox if you missed it!