If you're using the Self Assessment system to file your tax returns, you've got a critical deadline looming right now. If you haven't already made your payment on account against your next tax bill, you could be looking at some serious trouble. The cut-off date for paying what you owe is the 31st of July, and we really don't advise missing it.

Payments on account confuse a lot of people, many of whom think they're already up-to-date on what they owe HMRC. The problem is that the taxman doesn't just want his bite of the income you made last year. He also wants a slice of what he thinks you're going to make this year!

To be fair, he claims he's actually trying to make things easier for you. It's pretty hard to take comfort in that when he starts demanding money you haven't even made yet, though.

Here's how it works.

When you file a tax return, HMRC guesses that you're probably going to the same amount of tax the following year. When you pay what you owe on or before the 31st of January as normal, you have to pay extra to cover some of your next tax bill "on account".

Your first payment on account comes to half your total tax bill that you just settled.

You then make another payment the following July to cover everything HMRC thinks you'll owe in your next Self Assessment return.

If it turns out you owe more after your payments on account are made, you make a balancing payment by the normal 31st of January deadline.

On the other hand, if you know you're going to make less money than you did the previous year, you can apply to have your payments on account reduced. You have to be sure of your footing here, though. HMRC gets really upset if it thinks you're not playing fair with your estimates.

With us so far? Well, a lot of people have trouble getting their heads around the system, and it causes some expensive headaches. You can easily end up with fines, plus interest on the amount you owe if you wait too long.

Don't Keep the Taxman Waiting!

Remember that it's not just the self-employed who need to file a Self Assessment tax return. For instance, you'll also need to submit one if you:

•    Have £2,500 or more in untaxed income, like money from renting out property and so on.
•    Have investment, dividend or savings income that adds up to £10,000 or more before tax.
•    Were a company Director, or had an income of over £100,000.
•    Need to pay Capital Gains Tax from selling things like shares or a second home.
•    Have income from abroad, or lived abroad with a UK income.

Most importantly, remember to get in touch with RIFT for help with everything to do with Self Assessment and HMRC. Never ignore a demand from the taxman to file a return or make a payment, even if you don't understand it. If you've already got penalties, definitely give us a call. We might be able to limit the damage – or even get them removed altogether!