What are payments on account?

Payments on account are two advance payments towards next year's tax bill, each usually half of last year's bill, due by 31 January and 31 July. They usually apply once your bill reaches £1,000.

If you are self-employed or a landlord, HMRC does not wait until the year is over to collect all your tax. Once your bill is big enough, it asks for payments in advance. The rules below follow GOV.UK as checked on 16 October 2026.

How payments on account work

Each payment on account is half of the tax you owed for the year just gone. They cover Income Tax and Class 4 National Insurance. The first is due by 31 January, the second by 31 July.

When the year is over and you file your return, HMRC compares your actual bill with the two payments. If you owe more, you pay the difference by 31 January as a balancing payment. If you paid too much, the excess comes back to you or is set against what you owe.

You do not have to make payments on account if either:

• last year's Self Assessment bill was less than £1,000, or
• more than 80% of last year's tax was collected another way, for example through your tax code

The first-year shock

The first time payments on account kick in, 31 January brings two bills at once: the whole of last year's tax, and the first payment on account towards this year. That is 150% of a year's tax in one go.

Worked example. An electrician starts as a sole trader on 6 April 2026 and makes £30,000 profit in 2026-27. They live in England and have no other income (Scotland has different Income Tax bands).

The 2026-27 figure is 20% Income Tax and 6% Class 4 on the £17,430 of profit above £12,570. If profit stays at £30,000 in 2027-28 and the rates do not change, the two payments cover that year exactly, and 31 January 2029 brings only the next first payment on account. This is an example only. Your own figures will differ.

Reducing your payments on account

If you know this year's profit will be lower, for example because work has dropped off or you have bought a van, you can ask HMRC to reduce the payments. Do it in your HMRC online account under "Reduce payments on account", or by sending form SA303. You give your expected figure, and HMRC works out new payments. You must claim by 31 January after the end of the tax year.

Be honest with the estimate. If you cut the payments and your bill turns out higher, HMRC charges interest on the difference from the original due dates.

What this means for you

The first January is the expensive one. If you are new to self-employment, put money aside from your first invoice, enough for the year's tax plus half as much again. In the example above, that is £6,797.70 by 31 January 2028. After the first year, the payments settle into a steady pattern of January and July.

If you are a CIS subcontractor, the deductions taken during the year are advance payments towards your tax and National Insurance, so they come off what you owe.

Making Tax Digital (MTD) changes none of this. Under MTD, your software shows an estimate of your bill after each quarterly update, which makes it easier to see what is coming. GOV.UK says late payment penalties under the new MTD rules do not apply to payments on account, though interest still does.

Steps to handle payments on account

1. After you file, check your Self Assessment statement or online account to see whether payments on account apply and how much they are.
2. Put both 31 January and 31 July in your diary.
3. If this year's profit will clearly be lower, reduce the payments online or with form SA303, using a realistic figure.
4. Set money aside each month. A separate savings pot for tax works well.
5. If you cannot pay, contact HMRC before the due date to ask about a payment plan.

The free MTD check shows when Making Tax Digital starts for you. There are more guides in the trades section and the landlord section.