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How to Calculate the January Tax Bill

How to Calculate the January Tax Bill

Read on to view an example that illustrates how a self-employed person would calculate the tax payment due on 31st January 2019. This is particularly useful for those studying for the CII R03, R06, AF1 and AF5 exams.


As we head towards December and our thoughts move increasingly towards tinsel, turkeys and whether our Christmas jumper will do for another year, some of us may also be thinking of the dreaded January tax bill that arrives around the same time as the post-seasonal credit card bill…

The self-employed are only too familiar with the January ‘tax blues’ and the prospect of having the first payment of account to pay for the current tax year as well as the balancing payment that’s due for the previous tax year.

The self-employed are only too familiar with the January ‘tax blues’. Here's how to calculate just how big your January tax headache's going to be! Click To Tweet


Let’s look at an example:

Joe had a tax bill in 2016/17 of £14,000 and in 2017/2018 of £16,000.  Let’s estimate that his tax bill for 2018/2019 will be £20,000.

What will his tax payment be on 31st January 2019?

Firstly, we need to consider the balancing payment for the tax year 2017/18.  By the 31st January 2018 and by the 31st July 2018 he will have made two payments on account totalling £14,000 (100% of the 2016/17 tax year).  He will owe the difference between the £14,000 he’s paid and the £16,000 he actually owes for 2017/18 so his balancing payment will be £2,000.

He also has to pay the first payment on account for the current tax year, ie 2018/19.  This figure is based on 50% of the previous year’s tax bill – ie 50% of £16,000 which is £8,000.

But it doesn’t end there.  He will also have to pay his Class 2 flat rate National Insurance Contributions (NICs) and the balance of his Class 4 NICs, which are paid as a percentage of annual taxable profits.  In addition, if he has made any capital gains in 2017/18, any tax on these also has to be paid on 31st January 2019.

All in all, January can be an expensive month for the self-employed who must remember also that since January 2018, HMRC no longer accepts payment by personal credit card.

Grab the resources you need!

If you’re studying for your CII R03 exam, and you want to do all you can to prepare, grab our free taster to try out one of Brand Financial Training’s resources for yourself.  Click the link to download the R03 calculation workbook taster now!

Click here to download our free calculation workbook taster for CII R03

Alternatively, you can download the taster for AF1R06 or AF5 if any of those exams are in your near future.