Payments on account are advance payments towards your next Self Assessment tax bill. HMRC asks for them if your last bill was over £1,000. You pay two instalments a year, on 31 January and 31 July, and each one is usually half of your previous year’s bill.
They catch many people out, especially in their first year of self-employment. This guide explains who pays them, how HMRC works them out and what you can do if your income falls.
Who Has to Make Payments on Account?
You make payments on account if both of these apply:
- Your last Self Assessment bill was more than £1,000.
- Less than 80% of your tax was already paid at source, for example through PAYE on a salary.
Most sole traders, landlords and directors with large dividends fall into this group. If most of your income is taxed through PAYE, you usually do not make them.
How Are Payments on Account Calculated?
Each payment is half of your previous year’s Self Assessment bill. HMRC bases this on your Income Tax and Class 4 National Insurance. It does not include Capital Gains Tax or student loan repayments.
HMRC assumes your income will stay the same next year. If you actually earn more, you pay the difference later in a balancing payment. If you earn less, you can ask HMRC to reduce your payments.
When Are Payments on Account Due?
| Date | What you pay |
|---|---|
| 31 January 2027 | Balancing payment for 2025/26 and first payment on account for 2026/27 |
| 31 July 2027 | Second payment on account for 2026/27 |
| 31 January 2028 | Balancing payment for 2026/27 and first payment on account for 2027/28 |
Our Self Assessment deadlines guide lists every other key date for your return.
Why Is My First January Bill So High?
In your first year of payments on account, you pay two things on the same day. You pay the full tax for the year just ended, plus the first advance payment for the current year. This can mean paying up to one and a half years of tax at once.
Worked Example
Sarah started self-employment in 2025/26. Her tax bill for that year is £6,000, and she has never made payments on account before.
- 31 January 2027: £6,000 for 2025/26, plus £3,000 as her first payment on account for 2026/27. Total: £9,000.
- 31 July 2027: £3,000 as her second payment on account for 2026/27.
- 31 January 2028: her 2026/27 bill turns out to be £7,000. She has already paid £6,000, so she pays a £1,000 balancing payment. She also pays £3,500 as her first payment on account for 2027/28.
Planning for this jump early avoids a nasty surprise. Our guide on how to estimate your business tax bill shows how much to set aside each month.
Can I Reduce My Payments on Account?
Yes. If you expect your income to fall, you can ask HMRC to reduce your payments on account. You can do this online through your HMRC account or by sending form SA303. Common reasons include lower profits, higher expenses or stopping self-employment.
Be careful not to reduce them too far. If your actual bill turns out higher, HMRC charges interest on the shortfall from the original due dates. A realistic estimate, based on up-to-date figures, is the safest approach.
What Happens If I Pay Late?
HMRC charges interest on late payments on account at the Bank of England base rate plus 4%. Late payment penalties apply to your balancing payment, but not to payments on account themselves. Interest still builds up from the day after each due date, so pay on time where you can.
If you cannot pay, contact HMRC early. If you owe £30,000 or less, you can usually set up a Time to Pay arrangement online.
Do Payments on Account Change With Making Tax Digital?
No. Making Tax Digital changes how you report your income, through quarterly updates, but not when you pay. Payments on account stay due on 31 January and 31 July.
How We Can Help
Our Self Assessment accountants in Slough work out your payments on account, check whether you can reduce them and remind you before each due date. You can also find more detail on HMRC’s payments on account page.
Frequently Asked Questions
Do I get my payments on account back if I stop trading?
If you have paid more than your final bill, HMRC refunds the difference once you file your return. You can also apply to reduce your payments as soon as you know your income will fall.
Are payments on account an extra tax?
No. They are not extra tax. They are advance payments towards a bill you would pay anyway. HMRC deducts them from your final bill when you file.
Do landlords make payments on account?
Yes, if their Self Assessment bill is over £1,000 and less than 80% of their tax is paid at source. Many landlords with rental income pay them.