Payment of Tax

The UK income tax system requires taxpayers to deduct tax at source, eliminating taxpayers’ need to file tax returns or make additional payments. This is especially true for employment income. Interest is now taxed, but the savings allowance eliminates many taxpayers’ need to pay tax on such income. However, tax deduction at source is not possible for self-employment or if one has sufficient investment income. As a result, we have a payment rule in which payment is usually made in instalments.

The instalments include two payments for the same amount:

Year First of January and 31st of the tax year
Second after July 31 31.

These determine the net income tax liability of the previous year.

The final payment will be made on January 31 after the tax year. Any tax is waived due to capital gains in calculating the level of instalments. All capital gains tax will be paid as part of the final payment after the tax year’s end on January 31. Similar to a credit card statement, the account statement is periodically sent to the taxpayer, capturing the required payments and the payments made.