Key takeaways
- Payments on account are two advance payments towards next year's tax bill, each normally half of last year's Self Assessment liability.
- They are due on 31 January and 31 July, with any balance settled the following 31 January.
- You do not make them if last year's bill was under £1,000, or more than 80% of your tax was collected at source.
- In your first profitable year you can face 150% of a year's tax in one January: the full bill plus the first payment on account.
- You can reduce them if you expect a lower bill, but interest is charged if you reduce them too far.
Payments on account catch out many people in their first years of self-employment or letting. They are advance payments towards the current year’s tax, based on last year’s bill. They are not extra tax, but the timing can come as a shock.
How payments on account work
If you pay tax through Self Assessment, HMRC expects you to pay during the year rather than all at the end. So for each tax year you make:
| Payment | Due date | Amount |
|---|---|---|
| First payment on account | 31 January during the tax year | 50% of last year’s Self Assessment bill |
| Second payment on account | 31 July after the tax year ends | 50% of last year’s Self Assessment bill |
| Balancing payment | 31 January after the tax year ends | The rest of the bill, or a refund if you paid too much |
The amounts are based on the Income Tax and Class 4 National Insurance due through Self Assessment. Capital Gains Tax and student loan repayments are not included in payments on account; they are paid in full with the balancing payment.
When you do not need to make them
You do not make payments on account if either:
- your last Self Assessment bill was less than £1,000, or
- more than 80% of last year’s total tax was deducted at source, for example through PAYE or on savings
Example: the first year of self-employment
Ellie starts freelancing in 2025/26 and files her first return in January 2027. Her tax and Class 4 NI for 2025/26 is £8,000.
| Date | Payment | Amount |
|---|---|---|
| 31 January 2027 | Tax for 2025/26 | £8,000 |
| 31 January 2027 | First payment on account for 2026/27 (50% of £8,000) | £4,000 |
| 31 January 2027 total | £12,000 | |
| 31 July 2027 | Second payment on account for 2026/27 | £4,000 |
| 31 January 2028 | Balancing payment for 2026/27 | Actual 2026/27 bill minus £8,000 |
This first January, at 150% of a year’s tax, is why new freelancers are advised to save a proportion of their income from the start. Our payments on account calculator shows your dates and amounts.
Reducing your payments on account
If you expect this year’s bill to be lower than last year’s, for example because profits have fallen, you have stopped trading or more tax will be taken through PAYE, you can ask HMRC to reduce your payments on account:
- online, through your HMRC account, or
- on paper form SA303
You can reduce them at any time before the balancing payment date, and any overpayment already made is refunded or credited.
Be realistic. If you reduce them and your final bill turns out higher, you pay interest on the difference between what you paid and what you should have paid, from the original due dates. HMRC can charge a penalty if you deliberately or carelessly reduce them too far.
If your bill goes up
Payments on account do not increase automatically during the year if your income rises. You pay the extra with the balancing payment the following January, along with a higher first payment on account for the next year. If your profits are rising quickly, set money aside throughout the year.
Payments on account and Making Tax Digital
Making Tax Digital for Income Tax does not change the payment dates. You still pay on 31 January and 31 July. Your quarterly updates give you an estimate of your tax, which helps you decide whether to reduce your payments on account. See MTD for sole traders.
Paying in instalments
If you would rather spread the cost, you can make voluntary payments towards your next bill through HMRC’s budget payment plan, or ask for a Time to Pay arrangement if you cannot pay on time.
Frequently asked questions
What is a payment on account?
An advance payment towards your next Self Assessment bill. There are two each year, on 31 January and 31 July, each normally half of the previous year’s bill.
Why is my first Self Assessment bill so high?
Because you pay the full tax for your first year and the first payment on account for the next year on the same 31 January.
Do I pay Capital Gains Tax through payments on account?
No. Capital Gains Tax is not included; it is paid in full by 31 January after the tax year, or within 60 days of selling UK residential property.
Can I stop making payments on account?
You can reduce them, to nil if appropriate, if you expect your next bill to be lower, using your HMRC account or form SA303. Interest applies if the reduction proves too large.
Sources
Rates, thresholds and rules in this guide were checked against HMRC and GOV.UK guidance in October 2026. Tax rules change, so check the current position on GOV.UK or with a qualified adviser before acting. This guide is general information, not personal advice.