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Increase in payment on account threshold for income tax self-assessment

Relevant to Small businesses and individual taxpayers in the UK who make payments on account of their annual income tax liability under the income tax self-assessment system and whose income tax bill is below £1,000

From 6 April 2009, for tax years starting on or after this date, the threshold below which taxpayers do not need to make in-year payments on account (POA) of their annual income tax liability under the income tax self-assessment (ITSA) system will double from £500 to £1,000.

In-year POA are the two equal payments made by taxpayers in January and July on account of their annual income tax liability for the previous tax year.

The new threshold will apply to income tax due from ITSA taxpayers for tax years 2009-10 and beyond.

This will mean that those taxpayers with liabilities under £1,000 in 2008-09 will not have to make instalment payments on 31 January and 31 July 2010 towards that 2009-10 liability, but will instead make a single payment on 31 January 2011.

However, if your tax liability for 2007-08 as shown on the tax return you filed by 31 January 2009 is above £500, payments on account will still be due in January and July 2009. This is because these payments are on account for 2008-09 for which the £500 threshold still applies.

Self assessment guidelines on the HM Revenue & Customs website

Full title of regulation Income Tax (Payments on Account) (Amendment) Regulations 2008 [SI 2008 838]