Payments on account are advance payments towards your Self Assessment tax bill. HMRC asks for them when your previous year’s tax bill was over £1,000 and less than 80% of your tax was collected through PAYE or other deduction at source. Each payment is half your previous year’s tax bill, due 31 January and 31 July. The result is that a self-employed person makes three payments in their second tax year , last year’s balance plus two halves of this year’s expected bill , and then settles into a steady rhythm of two payments on account plus a balancing payment in following years. This calculator works out your payments on account, projects when they’ll arrive, and shows what you can do if your income drops and you need to reduce them.
How the timing works
A worked example clarifies the rhythm. Say your 2026/27 Self Assessment bill is £8,000.
- 31 January 2028: pay £8,000 (the 2026/27 balance) plus £4,000 (first payment on account towards 2027/28). Total: £12,000.
- 31 July 2028: pay £4,000 (second payment on account towards 2027/28). Total: £4,000.
- 31 January 2029: file the 2027/28 return. If actual 2027/28 bill is also £8,000, you’ve already paid £8,000 in payments on account and owe nothing as a balancing payment, but you do owe £4,000 (first payment on account towards 2028/29). Total: £4,000.
- 31 July 2029: £4,000 (second payment on account towards 2028/29).
Year one of self-employment doesn’t have payments on account because there’s no prior bill to base them on. Year two is the heaviest year , the full year-one bill plus two halves of year two adds up to roughly 1.5x a typical year. After that, the cycle balances.
When payments on account don’t apply
You won’t have payments on account if any of the following are true:
- Your previous Self Assessment bill was £1,000 or less.
- 80% or more of your tax for the previous year was deducted at source (typical of someone whose only Self Assessment trigger is dividend income that triggered the £10,000 threshold but whose main income is PAYE).
- You’re filing your first Self Assessment return.
The £1,000 threshold catches a lot of small landlords and side-hustle sole traders. It’s a true threshold, not a personal allowance , if your tax bill is £1,001, you’ll be asked for payments on account on the full £1,001.
Reducing payments on account when income drops
If you expect your 2027/28 income to be lower than 2026/27 , perhaps you’ve moved to PAYE employment, lost a major contract, or had a one-off year of high income , you can apply to reduce your payments on account. Three routes:
- Online: log in to your HMRC Personal Tax Account or Self Assessment account, find your latest return, click “Reduce payments on account” and enter your estimate of the new bill.
- SA303 form: download from gov.uk, fill in your estimate, post to HMRC.
- Phone: 0300 200 3822 (Self Assessment Payment Helpline). Be ready with your UTR.
The application must be made before 31 January following the tax year (so for 2027/28 payments, by 31 January 2029). HMRC accepts your estimate at face value but charges interest if you reduce too aggressively and your actual bill turns out higher than the reduced payments , interest at the prevailing rate (currently around 7.75%) on the difference, from the original payment due dates.
The honest framing: only reduce if you have a credible reason. Reducing simply because you’d rather not pay invites an interest charge later.
When you can’t pay your payments on account
The first payment on account often catches people out because it lands at the same time as the prior-year balance. If you can’t pay, contact HMRC before the deadline. Time to Pay arrangements spread the bill over up to 12 months in most cases, available online via your Self Assessment account for bills under £30,000. The arrangement avoids the late-payment surcharge but still attracts interest at the daily rate.
Don’t simply not pay. The 5% surcharge at 30 days past due is on top of interest, the 5% at 6 months is added, and the 5% at 12 months adds another. A £4,000 missed payment becomes £4,800 in surcharges alone over a year, plus interest.
Why HMRC asks for payments on account at all
Payments on account exist because Self Assessment otherwise lets people earn tax-free for nearly two years before the bill is due. A 2026/27 sole trader who earned £45,000 profit doesn’t have to pay any income tax until 31 January 2028 , almost 22 months after the start of the tax year. Payments on account claw some of that gap back by collecting half the tax for the current year while the year is still in progress.
For HMRC, payments on account smooth their cash flow. For the taxpayer, they smooth a one-off annual bill into two payments and avoid the year-three problem of suddenly having a much bigger January cheque to write.
Key takeaways
- Payments on account apply when your prior Self Assessment bill exceeded £1,000 and less than 80% of your tax was deducted at source.
- Each payment is half the prior year’s bill, due 31 January and 31 July.
- Year two of self-employment is the heaviest because of the timing overlap; subsequent years are smoother.
- You can reduce payments on account if you expect a lower bill , online, by SA303, or by phone , but interest applies if your reduction was too generous.
- Time to Pay arrangements are available for those who can’t pay; contact HMRC before the deadline.
Frequently asked questions
Why is my January bill so big? The January after your second Self Assessment year almost always feels brutal. You’re paying the previous year’s balance (which itself includes a balancing payment if your income grew) plus half of the current year’s expected bill. If income has been rising, the first payment on account is also rising, compounding the cash flow shock.
Can I pay payments on account in instalments? Yes, but only through a formal Time to Pay arrangement with HMRC. Otherwise, the full payment must hit HMRC by the due date. Some sole traders set up a monthly direct debit as a “budget plan” that pre-funds their HMRC account; the system holds the credit and applies it on the due date.
What happens if I overpay payments on account? If your final bill is lower than your two payments on account, HMRC issues a refund (or applies the credit to the next bill, which is often more useful for cash flow). You can request the refund to your bank account through your Self Assessment account.
Are payments on account just for income tax, or also Class 4 NI? Both. The payment on account covers your full prior-year Self Assessment liability , income tax plus Class 4 NI plus any high-income child benefit charge. It excludes Capital Gains Tax (which has its own 60-day reporting and payment for residential property) and Class 2 NI (which is now mostly automatic credit).