Instalment tax requires businesses and individuals with business income to pay part of their income tax during the year, rather than in one sum after the year ends. It smooths government revenue — and, managed well, it can smooth your cash flow too.
When is it due?
For most taxpayers, instalments are due on the 20th day of the fourth, sixth, ninth and twelfth months of the year of income. Agricultural businesses follow a different schedule. If your year-end is not 31 December, the months count from the start of your own financial year.
How much should you pay?
Each instalment is generally based on the lower of your estimated tax for the current year, or the previous year’s tax uplifted as the law prescribes. Choosing the right basis — and revisiting it during the year — is where most of the value lies.
Common pitfalls
- Relying on last year’s figures when results have changed significantly
- Forgetting that a non-calendar year-end shifts the due dates
- Not revisiting estimates after a strong or weak quarter
- Treating instalments separately from year-end tax planning
A simple routine
Build the four dates into your finance calendar, review management accounts a few weeks before each one, and agree the estimate with your advisor. At year-end, reconcile instalments paid to the final liability so any balance or overpayment is dealt with promptly.
This article is general information and is not tax advice. Rules and thresholds change — talk to us about your specific circumstances.