What are payments on account?
Payments on account are two advance payments towards your next Self Assessment tax bill, each normally half of the previous year's bill, due on 31 January and 31 July.
What payments on account mean
If you pay tax through Self Assessment, HMRC usually asks you to pay towards the next year's bill in advance. These advance payments are payments on account. Each one is normally 50% of your previous year's income tax and Class 4 National Insurance bill, and they are due on 31 January (during the tax year) and 31 July (just after it ends).
You do not have to make payments on account if your last Self Assessment bill was under £1,000, or if more than 80% of your tax was already collected at source, for example through PAYE.
Example
Amira starts trading as a sole trader in 2025/26 and her tax bill for that year is £6,000. Because it is her first year, she has made no payments on account yet.
- 31 January 2027: the full £6,000 for 2025/26, plus a first payment on account of £3,000 for 2026/27. Total £9,000.
- 31 July 2027: the second payment on account of £3,000 for 2026/27.
- 31 January 2028: any balance for 2026/27 above the £6,000 already paid, plus the first payment on account for 2027/28.
That first January is the one that catches people out: it can feel like paying 18 months of tax at once.
Why it matters for your business
Payments on account smooth out tax over time, but only if you plan for them. Setting aside a percentage of every invoice, or using the self-employed tax calculator to estimate the bill, avoids the January cash shock. If your income has dropped, you can ask HMRC to reduce your payments on account, but if you reduce them too far you will pay interest on the shortfall.
Our guide to payments on account explains how to reduce them and how they are calculated in more detail.
Common questions
Yes. If you expect your income to be lower this year, you can apply to reduce them through your HMRC online account or with form SA303. If the final bill turns out higher than the reduced payments, HMRC charges interest on the difference from the original due dates.
No. Payments on account cover income tax and Class 4 National Insurance only. Student loan repayments and Capital Gains Tax are paid in full with the balancing payment on 31 January. Make sure your savings for the January bill include these amounts, because they can be substantial in a year with a large gain.