What Are Payments on Account?

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The Details →

When Do Payments on Account Apply? →

How Do Payments on Account Work? →

Why Do Payments on Account Catch People Out? →

Payments on Account – Worked Example (Updated) →

What Happens When You Submit the Next Tax Return? →

What Do Payments on Account Include? →

When Do You NOT Have to Make Payments on Account? →

Can You Reduce Payments on Account? →

Important Warning on Reductions →

Struggling to Pay? Time to Pay Arrangements →

How to Check Your Payments on Account →

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The Details

If you are a UK Self Assessment taxpayer and less than 80% of your tax is collected at source (e.g. via PAYE), HMRC may require you to make payments on account towards your next year’s tax bill.

Payments on account are advance payments of Income Tax and Class 4 National Insurance, designed to prevent large tax bills building up after the end of the tax year.

This guide explains:

What payments on account are
When they apply
How they are calculated
When they can be reduced
Common pitfalls to avoid

When Do Payments on Account Apply?

You will normally have to make payments on account if both of the following apply:

Your Self Assessment tax bill for the previous tax year is more than £1,000, and
Less than 80% of your total tax liability was deducted at source (for example via PAYE)

Payments on account most commonly affect:

Sole traders
Partners in partnerships
Landlords
Individuals with significant untaxed income

How Do Payments on Account Work?

HMRC bases payments on account on your previous year’s tax bill. In effect, HMRC assumes that your income (and tax liability) for the current tax year will be similar to the previous one.

Payments are split into two equal instalments:

First payment on account: 31 January (during the tax year)
Second payment on account: 31 July (after the tax year ends)

This means you may be paying:

The final balance for the previous tax year, and
The first payment towards the next tax year on the same 31 January deadline.

Why Do Payments on Account Catch People Out?

Unlike employees, who pay tax in real time through PAYE, self-employed individuals pay tax in arrears.

Payments on account are intended to:

Spread tax payments more evenly
Reduce the risk of large future bills

However, for first-time self-employed individuals or landlords, this often results in a much higher than expected January tax bill, as two tax demands fall due at once.

Payments on Account – Worked Example (Updated)

Example: 2023/24 Tax Year

Tax bill for 2023/24: £6,000
No payments on account made previously

What Is Due on 31 January 2025?

Each payment on account is 50% of the previous year’s bill.

First payment on account for 2024/25: £3,000

Total due by 31 January 2025:

£6,000 (balancing payment for 2023/24)
£3,000 (first payment on account for 2024/25)

Total payable: £9,000

What Is Due on 31 July 2025?

Second payment on account for 2024/25: £3,000

What Happens When You Submit the Next Tax Return?

When your 2024/25 tax return is submitted (by 31 January 2026):

HMRC compares the actual tax due with the payments already made

If You Have Underpaid

You must pay a balancing payment by 31 January 2026

If You Have Overpaid

HMRC will refund the difference or offset it against future liabilities

What Do Payments on Account Include?

Payments on account cover:

Income Tax
Class 4 National Insurance (where applicable)

They do not include:

Student Loan repayments
Capital Gains Tax

Class 2 National Insurance (now largely abolished)

When Do You NOT Have to Make Payments on Account?

You will not need to make payments on account if:

Your tax bill for the previous year was £1,000 or less, or
80% or more of your tax was already deducted at source through PAYE

Can You Reduce Payments on Account?

Yes. If you reasonably expect your income (and tax bill) for the current tax year to be lower than the previous year, you can apply to reduce your payments on account.

This is commonly done where: