The last tax year began on 6 April 2023 and ended on 5 April 2024. If you were self-employed during this time or received income which needs to be reported (such as dividend income) then the Self Assessment tax return filing deadline is looming. You need to submit your 2023/24 tax return and pay self assessment tax by midnight on 31 January 2025. In this blog, we will explain everything you need to know. If you need help with your taxes, please get in touch with us today.

31 January 2025

The 31st of January is a date that many dread as it is when you’re likely to pay the most tax. The reason for this is that the 31st of January is home to the following 3 deadlines:

1. Self Assessment Tax Return Filing Deadline

HMRC must receive your self employed tax return by the following deadlines:

• If you are submitting an online tax return - midnight on the 31st January 2025
• If you are submitting a paper tax return - midnight on the 31st October 2024

Note, if it’s your first time doing this, the self assessment registration deadline is 5 October (before the 31st of Jan). By this date, you must tell HMRC that you need to submit a tax return. To do this, you can register as self employed online.
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2. Deadline to Pay Self Assessment Tax

You must pay your outstanding taxes for 2023/24 by midnight on the 31st January 2025. This is known as a 'balancing payment' and should settle your 2023/24 tax bill. We explain this in more detail below. You’ll likely incur penalties if you fail to pay on time.

3. Deadline for 1st Payment on Account

In addition, on the 31st of January, you need to submit your 1st payment on account for the current tax year (2024/25). Self-employed people generally pay HMRC using payments on account. See our blog covering the Self Assessment Payment on Account system. In essence, this system is meant to spread the burden into 2 payments toward your tax bill rather than 1 large payment at the end. We explain this with an example below.

Under this system, you need to make payment of Self Assessment tax as follows:

• 1st payment on account by midnight on the 31st of January
• 2nd payment on account by midnight on the 31st of July

Self Assessment Example

Here is an example of a self assessment tax year showcasing how payments on account and balancing payments work.
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What is a Payment on Account for Self Assessment?

The amount you need to pay on each of the payment on account deadlines is calculated as half of last year's tax bill. For example, as depicted above, if your 2022/23 tax bill was £8,000, then for the 2023/24 tax year, you will have paid £4,000 on 31 January 2024 and £4,000 on 31 July 2024. Side note, if it was your first year, you would pay your full tax bill in one payment on 31 January 2025, after which the above applies.

This repeats every year, so now that you are in the 2024/25 tax year, you need to make your first payment on account on 31 January 2025. At half last year’s (2023/24) tax bill (£10,000), you need to pay £5,000 as your 1st payment on account for 2024/25.

Why is it half of last year’s tax bill? HMRC does it this way in an effort to estimate your likely tax bill. Of course, your actual tax bill may be higher or lower, meaning you might under or over pay HMRC through your 2 payments on account during the year. This is where the 31st of January becomes important once more.

What is a Balancing Payment for Self Assessment?

The 31st of January is when any under or over payments are settled with HMRC. If, after making your payments on account, you have underpaid HMRC (your tax bill is higher than last year), you will make a balancing payment. This will equate to the difference between last year’s and this year’s tax bill. 

Using the same example, depicted above, your prior 2022/23 tax bill was £8,000 so for the 2023/24 tax year you have paid HMRC £8,000 through payments on account (£4k on 31 Jan 2024 and £4k on 31 July 2024). Your actual 2023/24 tax bill is higher at £10,000 so you owe HMRC the difference, £2,000. You need to pay this as a balancing payment to HMRC on 31 January 2025.

31 January Tax Bill

In this example, your total tax bill on 31 January 2025 will be £7,000 because you must make 2 payments on this date:

• A balancing payment to settle your 2023/24 tax bill. £2,000 in this case.
• 1st payment on account for the 2024/25 tax year. £5,000 in this case.

Lastly, your payments on account do not include anything you may owe in terms of capital gains, student loans etc. You would also settle these amounts within your balancing payment on 31 January.

Last Word

The deadlines you need to remember are the 31st of January (tax return filing and balancing payment for the last tax year & first payment on account for the current tax year) and the 31st of July (2nd payment on account). 

While payments on account provide an advantage over monthly tax bills, this system does increase the potential for you to spend the money instead of keeping it aside for your tax bill. If you wish to reduce this risk, check out how to make a payment plan with HMRC. If you need help with your taxes, please get in touch with us today.