[ˈbælənsɪŋ ˈpeɪmənt]
A balancing payment settles outstanding tax liabilities that were not covered by previous payments on account.
A balancing payment is a payment made by taxpayers to HMRC to settle any outstanding tax liability. It is typically due on 31st January following the end of the Tax Year and represents the difference between the total tax liability and the amount of tax already paid through the year via tax withholding or Payments on Account.
These payments are common for self-employed individuals or those with additional income streams that are not taxed at source, like rental income. If there is a failure to make a balancing payment by the due date, it can result in penalties and interest charges, so it is important to ensure that all tax liabilities are settled in full and on time.
The balancing payment ensures that the taxpayer has paid the correct amount of tax.
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