What is the payment on account for self assessment?

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A Payment on Account is simply an advance payment towards your next tax bill. HMRC uses this system to collect tax in installments from self-employed people and other Self Assessment taxpayers, rather than asking for one massive lump sum at the end of the year.

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How Payments on Account Work

When you fill out your Self Assessment tax return, HMRC looks at your final tax bill. If that bill is more than £1,000, HMRC assumes you will earn a similar amount of money next year.

To help you stay on top of your taxes, they take next year’s estimated bill and split it into two equal chunks. Each chunk is exactly 50% of your previous year’s tax bill. These two chunks are your payments on account.

When Are the Deadlines?

You are required to make these advance payments twice a year:

• 31 January: You pay your first advance payment for the current tax year. (Note: You pay this on the exact same day you pay any leftover tax from your previous year).
• 31 July: You pay your second advance payment.

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An Easy Example

Let’s say your total tax bill for the 2024/25 tax year comes to £3,000.

Because your bill is over the £1,000 threshold, HMRC will ask you to make advance payments toward your 2025/26 tax bill. Here is what your payment schedule will look like:

Payment Date	What You Are Paying	Amount Due
31 January 2026	Your leftover tax from the 24/25 tax year	£3,000
31 January 2026	Your first payment on account for 25/26 (half of £3,000)	£1,500
31 July 2026	Your second payment on account for 25/26 (half of £3,000)	£1,500

By the time the next tax year finishes, you will have already paid £3,000 in advance.

If your actual tax bill for 2025/26 turns out to be £3,500, you will only need to pay the remaining £500 as a “balancing payment” the following January. If your final bill is actually lower than what you paid, HMRC will send you a refund.

Who Is Exempt?

You do not have to worry about payments on account if either of these apply to you:

• Your last Self Assessment tax bill was under £1,000.
• You have already paid more than 80% of all the tax you owe at the source (for example, if you have a regular job alongside your side-hustle, and your employer already taxes you through the PAYE system).

What If My Income Goes Down?

A common worry for self-employed people is being asked to pay last year’s high taxes when this year’s income has suddenly dropped.

If you know you are going to earn less money—perhaps you lost a big client or decided to work part-time—you can ask HMRC to reduce your payments on account. You can do this by logging into your online HMRC account and selecting “Reduce payments on account.”

Just be honest with your estimates. If you reduce your advance payments too much and end up owing HMRC more money than you predicted, they will charge you interest on the missing amount

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