Payments on Account: The Self-Assessment Surprise
Quick answer
Payments on account are two advance instalments towards next year's tax bill, each 50% of last year's tax, due on 31 January and 31 July. You make them if your last bill was over GBP 1,000 and less than 80% of your tax was collected at source. In your first profitable year this can mean up to 150% of one year's tax due at once.
Payments on account: the key facts (2026/27)
| Question | Answer |
|---|---|
| What they are | Two advance instalments towards next year's tax bill, paid in addition to settling this year's bill |
| How much each is | Half (50%) of the total tax you owed last year |
| First instalment due | 31 January, alongside the balancing payment for the year just ended |
| Second instalment due | 31 July |
| When you must make them | If your last Self Assessment bill was GBP 1,000 or more |
| When you are exempt | If your last bill was under GBP 1,000, or you paid more than 80% of your tax at source (for example through a tax code or bank interest already taxed) |
| First-year impact | Up to 150% of one year's tax on the first 31 January: the full year's bill plus the first 50% instalment |
| Balancing payment | The difference between your actual tax and the payments on account already made, settled the next 31 January |
| How to reduce them | Claim online through your HMRC account, or by posting form SA303 |
| Risk of over-reducing | If you reduce them and your real bill is higher, HMRC charges interest on the difference |
Step by step
- 1
Check whether payments on account apply to you
You make them if your last Self Assessment bill was GBP 1,000 or more, unless you paid more than 80% of your tax at source (for example through a tax code or already-taxed bank interest). Under GBP 1,000 and you are exempt.
- 2
Settle this year's bill and the first instalment by 31 January
On 31 January you pay the balancing payment for the tax year just ended plus your first payment on account (50% of that year's tax) towards the next year. In a first profitable year this is the moment the bill spikes.
- 3
Pay the second instalment by 31 July
The second payment on account, the other 50%, is due by midnight on 31 July. If a deadline falls on a weekend or bank holiday, make sure HMRC has the money by the last working day before.
- 4
Settle up with the balancing payment next 31 January
When you file the next return, HMRC deducts the two payments on account from your actual tax. You pay any shortfall (the balancing payment), or get a refund or credit if you overpaid.
- 5
Claim to reduce them if your income has genuinely fallen
If you expect to owe less, claim to reduce your payments on account through your HMRC account or by posting form SA303. Be careful: if you reduce them and your real bill turns out higher, HMRC charges interest on the difference.
Payments on account are the part of Self Assessment that blindsides almost every first-time filer. They are not an extra tax. They are next year's tax pulled forward: two advance instalments, each half of what you owed last year, due on 31 January and 31 July. HMRC assumes your next bill will look like your last one and collects it early.
The shock lands in your first profitable year. On that first 31 January you settle the full bill for the year just gone, and at the same time pay the first 50% instalment towards the next year. Take a GBP 5,000 tax bill: on 31 January you owe the GBP 5,000 balancing payment plus a GBP 2,500 payment on account, so GBP 7,500 leaves your account at once, 150% of one year's tax. Then a further GBP 2,500 falls due on 31 July. From year two the cycle smooths out, because the instalments you have already paid are deducted from each new bill. The structure quietly punishes lumpy and seasonal incomes, which is exactly why setting money aside early matters.
You cannot opt out, but you can claim to reduce your payments on account if your income has genuinely dropped, online through your HMRC account or with form SA303. Reduce them too far and HMRC charges interest on the shortfall, so be realistic. For the wider picture, start with our self-employed tax guide, cut the bill that drives these instalments with allowable expenses, and see where this sits in the filing year in the Self Assessment tax return guide.
Figures are for the 2026/27 tax year and are taken from gov.uk; tax rules and thresholds can change. This is general information, not financial or tax advice.
Frequently asked questions
What does a payment on account mean?
A payment on account is an advance instalment towards your next Self Assessment tax bill. HMRC asks for two, each half of the tax you owed last year, due on 31 January and 31 July. It is not an extra tax; it is next year's tax pulled forward.
Why are HMRC asking for payment on account?
Because your last Self Assessment bill was GBP 1,000 or more and less than 80% of your tax was collected at source. HMRC assumes you will owe a similar amount next year and collects it in advance rather than in one lump.
Why is my first Self Assessment bill so high?
Because your first profitable year stacks two things on one 31 January: the full balancing payment for the year that just ended, plus the first 50% payment on account towards the next year. That can total up to 150% of a single year's tax in one go.
Can you avoid payment on account with HMRC?
You cannot opt out, but you can claim to reduce them if you genuinely expect to owe less, for example if your income has dropped. Do it through your HMRC account or with form SA303. Reduce too far and HMRC charges interest on the shortfall.
How do I see my HMRC payments on account?
Sign in to your HMRC online account and check your Self Assessment statement. It shows the payments on account due, the dates, anything already paid, and the balancing payment owed.
Sources
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General information, not financial advice. Tax rules and figures can change; check the current position on gov.uk before acting.