Payments on account are advance payments made twice a year toward your next Self Assessment tax bill. HMRC uses this system to help spread the cost of your tax liability, based on the assumption that your income will be similar to the previous year.

If your tax bill is over £1,000 and less than 80% of your tax was collected at source (e.g. through PAYE), you’ll likely be required to make payments on account.

 

How Payments on Account Work

• You make two instalments each year

• Each payment is 50% of your previous year’s tax bill (including Class 4 National Insurance if applicable)

• These payments go toward your next tax year’s bill, not the current one

 

Payment Deadlines

• 31 January – First payment on account

• 31 July – Second payment on account

💡 Example:
If your tax bill for 2024-2025 was £2,000, you’ll pay £1,000 on 31 January 2026 and £1,000 on 31 July 2026 toward your 2025-2026 tax bill.

 

What Is a Balancing Payment?

After you submit your tax return for the current year, HMRC compares your actual tax liability to what you’ve already paid on account:

• If you underpaid, you’ll need to make a balancing payment by 31 January

• If you overpaid, HMRC will issue a refund or apply the surplus to your next bill

 

Can You Reduce Payments on Account?

Yes — if you expect your income to be lower than last year, you can apply to reduce your payments:

• Online via your HMRC account

• By submitting form SA303 by post

⚠️ Be cautious: if you reduce your payments too much and end up owing more, HMRC will charge interest on the shortfall.

 

First-Time Filers: What to Expect

If this is your first year filing and your tax bill exceeds £1,000, you’ll need to:

• Pay your full tax bill for the current year

• Make your first payment on account for the next year — all by 31 January

This can be a surprise, so it’s wise to prepare early and set aside funds throughout the year.

 

Here is an example: Tax Liability: £2,000

Let’s say your total Self Assessment liability for 2024–2025 is £2,000. This includes:

• Income Tax

• Class 4 National Insurance Contributions (if applicable)

Since your bill is over £1,000 and less than 80% was collected through PAYE, HMRC will require you to make Payments on Account toward the 2025–2026 tax year.

 

What You’ll Need to Pay by 31 January 2026

• £2,000 for your 2024–2025 tax liability (the “balancing payment”)

• £1,000 first Payment on Account for 2025–2026 (50% of £2,000)

Total due by 31 January 2026: £3,000

 

What You’ll Need to Pay by 31 July 2026

• £1,000 second Payment on Account for 2025–2026

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Need Help Managing Payments on Account?

We help self-employed individuals and small business owners:

• Understand their tax obligations

• Forecast payments accurately

• Avoid penalties and interest charges

• Reduce payments safely when income drops

📩 Contact us today for expert support and peace of mind. Let’s make tax season predictable — not painful.