Self-Assessment taxpayers are being reminded to make their advance tax payments by midnight tomorrow, July 31, to avoid incurring late payment interest charges, which have surged to a 16-year high of 7.75%.

Taxpayers under the Self-Assessment system must make two annual payments on account, unless their previous year’s tax bill was less than £1,000 or they paid over 80% of the previous year’s tax at source, such as through PAYE. Each payment constitutes half of the prior year’s tax bill, with deadlines on January 31 during the tax year and July 31 following the end of the tax year.

If any tax remains due after these payments, a balancing payment is required by midnight on January 31 of the following year.

Elsa Littlewood, a private client tax partner at BDO, a prominent accountancy and business advisory firm, highlighted the financial strain that the summer period can bring. “Summer can be an expensive time with holidays and childcare costs adding pressure to budgets,” she remarked.

Littlewood cautioned that missing the deadline or underpaying could lead to a 7.75% late payment interest rate on all outstanding amounts post-July 31. “This interest rate can significantly increase your overall tax bill, as debts to HMRC can escalate rapidly,” she warned.

She advised taxpayers to ensure they have sufficient funds and to arrange their payments well in advance to meet the deadline. For those expecting a lower tax bill for 2023/24, possibly due to early completion of their tax returns, there is an option to request a reduction in payments on account via HMRC’s online services.

For individuals facing difficulties in making payments, Littlewood mentioned the possibility of setting up a Time to Pay arrangement with HMRC. “For debts up to £30,000, this can be arranged relatively easily online,” she noted.

Additionally, Littlewood reminded taxpayers of the 5% penalty for payments that were due on January 31, 2024, but remain unpaid six months later. HMRC can also impose penalties for late filing of tax returns, urging taxpayers to bring any outstanding filings up to date promptly.

She also warned against potential scams, emphasizing the importance of verifying that payments are made to the correct HMRC account.

As the deadline approaches, taxpayers are urged to take necessary actions to avoid hefty interest charges and ensure compliance with HMRC regulations.