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ACCA Applied Skills · Taxation (UK) · The systems for self-assessment and the making of returns

Priya's income tax liability for 2025/26 was £9,000 after deducting tax deducted at source of £1,000 (so her net liability for payments on account purposes was £8,000). Her 2026/27 payments on account are based on the 2025/26 figures. Her actual 2026/27 income tax liability, after tax deducted at source, is £10,500. What is the balancing payment due on 31 January 2028?

The balancing payment is £2,500. Payments on account total the prior year's liability not collected at source, £8,000, and the actual current year liability is £10,500. The difference of £2,500 is due on 31 January following the end of the tax year.

  1. A£2,500Correct
  2. B£6,500
  3. C£1,500
  4. D£500

Explanation

Payments on account are based on the prior year liability not collected at source: £8,000, so two payments of £4,000 each. The actual 2026/27 liability not collected at source is £10,500, so the balancing payment is £10,500 - £8,000 = £2,500. The £500 option wrongly uses the £9,000 gross figure and ignores the deduction at source of £1,000 incorrectly applied to the current year.

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