Payments on account are two advance payments towards your next Self Assessment tax bill, including Class 4 National Insurance if you're self-employed. Each one is usually half of last year's tax bill, and they're due by midnight on 31 January and 31 July, unless last year's bill was under £1,000 or more than 80% of your tax was already collected at source.
Payments on account are the reason so many people get a nasty surprise in their first January as a freelancer or landlord. You're not paying more tax overall; you're paying some of it earlier. Here's how HMRC's rules work, straight from GOV.UK.
Who has to make payments on account
GOV.UK says you must make the two payments unless either of these applies:
- The tax you owed last year was less than £1,000
- Last year you paid more than 80% of the tax you owed outside Self Assessment, for example through your tax code or because your bank had already deducted interest on your savings
Your Self Assessment statement or online account shows how much your payments on account are, if you need to pay them.
How the amounts are worked out
Payments on account are based on your estimated earnings, usually what you earned the previous year. Each payment is usually half of the tax you owed the year before. If you earn more than expected, you'll have a balancing payment to make by 31 January the following year; if you earn less, you may be due a refund. The balancing payment also includes anything you owe for capital gains or student loans if you're self-employed.
The payment dates
| Date | What you pay |
|---|---|
| 31 January | Your balancing payment for the last tax year, plus your first payment on account for the current year |
| 31 July | Your second payment on account for the current year |
For the 2025 to 2026 tax year, that pattern means the balancing payment is due by 31 January 2027, together with the first payment on account for 2026 to 2027, and the second payment on account by 31 July 2027.
GOV.UK's worked example
GOV.UK uses this example, with figures as given on its page as of October 2026:
| Step | Amount |
|---|---|
| Tax bill for 2023 to 2024 | £3,000 |
| Payments on account already made towards it (2 x £900) | £1,800 |
| Balancing payment due 31 January 2025 | £1,200 |
| First payment on account for 2024 to 2025 (half of £3,000) | £1,500 |
| Total due by 31 January 2025 | £2,700 |
| Second payment on account due 31 July 2025 | £1,500 |
The first-year shock
This is the insight I wish every new freelancer knew before their first tax return. If you didn't make payments on account last year, for example because it's your first Self Assessment, you pay the whole of last year's bill plus the first payment on account for the next year on the same January date. In GOV.UK's example, a £3,000 bill means £4,500 to pay by 31 January. That's one and a half times the tax you expected, in one go, followed by another payment in July.
So in your first profitable year, save for the tax bill and then half of it again. If you set aside a slice of every invoice in a separate account, the January payment stops being a shock.
Reducing your payments on account
If you know your tax will be lower than last year, perhaps because work has dropped off or you've stopped trading, you can ask HMRC to reduce your payments on account. But GOV.UK warns that if you reduce them and your tax bill turns out higher, you'll be charged interest on the difference. Reduce them when you have good evidence, not just because January is tight.
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Common mistakes
- Forgetting July. The second payment on account is due by midnight on 31 July, and it's the one people most often miss because there's no return to file at the same time.
- Assuming a refund arrives by itself. If you earn less than estimated, GOV.UK says you may be able to claim a refund, so check your online account rather than waiting.
- Leaving out National Insurance. Payments on account include Class 4 National Insurance if you're self-employed, so budget for both, not just income tax.
- Forgetting the extras in January. The balancing payment also includes anything you owe for capital gains, or student loans if you're self-employed.
- Assuming PAYE covers you. The 80% test looks at how much of your tax was collected outside Self Assessment, such as through your tax code or bank interest deductions, so a growing side business can bring payments on account in.
Checking what you owe
- Sign in to your HMRC online account and select the option to view your latest Self Assessment return.
- Check the payments you need to make towards your next tax calculation.
- If you filed a paper return, check the payments on account on your last Self Assessment statement.
- Diarise both 31 January and 31 July, and pay by midnight on each date.
Not sure you need to file at all? Start with my guide to whether you need to do a Self Assessment. A separate business bank account for sole traders makes it much easier to ring-fence what you owe HMRC.
My verdict
Payments on account aren't extra tax, but they change when you pay it, and the first year is brutal: last year's bill plus half again, all in January. Plan for it, pay the July instalment on time, and only reduce your payments when you're confident your income has dropped. Get that rhythm right and Self Assessment becomes predictable.
Frequently asked questions
What are payments on account?
Two advance payments towards your next Self Assessment tax bill, each usually half of the tax you owed the previous year.
When are payments on account due?
By midnight on 31 January and 31 July.
Who doesn't have to make payments on account?
Anyone whose tax bill last year was under £1,000, or who paid more than 80% of their tax outside Self Assessment, such as through a tax code.
Why is my first Self Assessment bill so high?
If you didn't make payments on account last year, you pay last year's whole bill plus the first payment on account for the next year by 31 January.
Can I reduce my payments on account?
Yes, if you know your tax will be lower than last year. But if your bill turns out higher, HMRC charges interest on the difference.
Do payments on account include National Insurance?
Yes. They include Class 4 National Insurance if you're self-employed.
