Payments on account for self-employed

[PilatesPeach]

I have been SE for about 3 years.

Payments on account - so if my tax liability for 21/22 is 5k, I pay 5k plus 50% 31 Jan 23 then 50% ie £2,500 on 31st July as I understand it so effectively 10k

Then my tax liability for 22/23 is 6k so again on 31st Jan I have to pay 6k plus 3k and 3k 31st July 2024.

Regarding the total 5k POA made in 2023, does this get deducted from my tax due in 2024 so in effect the 5k is balanced against (ie used as a credit against) my 6k liability and 2 x 3k POA?

I am slightly confused and hoping I have understood this. thanks.

To add - I have read the gov.uk info but it is not entirely clear to a novice

Yes, you've already paid £5k of the £6k so you just pay the balance of £1k, plus the payments on account of the £3k each in Jan and Jul.

DP is self employed and I can't get my head round this either. It doesn't help that he's had a lot of different types of SE and his earnings have increased quite a bit.

He used to be on the construction industry scheme and he actually got a refund when he did his tax return. Then he did most of his work in a different industry but earned £20-25k, some of it PAYE and his tax bill was always a few hundred pounds as he'd already paid a bit.

But over the last couple of years, he's earned about £35/40k and his tax is really starting to ramp up, I'm expecting it to be more like £5/10k this time (he has got the money saved up, but it's a big chunk to hand over.

This.

The 1st year is the hardest as you are paying 2 years of tax in 6 months (albeit all on income you have already earned).

Your second sentence is wrong

Payments on account - so if my tax liability for 21/22 is 5k, I pay 5k plus 50% 31 Jan 23 then 50% ie £2,500 on 31st July as I understand it so effectively 10k YES.

Then my tax liability for 22/23 is 6k so again on 31st Jan I have to pay 6k plus 3k and 3k 31st July 2024. NO. THIS ONE IS WRONG. YOUR TAX IS £6k BUT YOU’VE ALREADY PAID £5k SO YOY ONLY PAY the difference - £1k DUE PLUS THE 50% (3k) for the next year in jan and 50% (3k) in July.

you only effectively pay double the first year. After that you have the money “on account” meaning you’re effectively in credit to Hmrc.

Being pedantic, you don't pay two years in the first year, because you pay nothing at all in the first year, so you actually pay for years 1 and 2 in year 2.