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Will I Need to Make Payments on Account?

How Payments on Account work, when they apply, and how to avoid the January bill catching you out.

Short answer: usually yes, if your Self Assessment tax bill is over £1,000 and less than 80% of the tax you owe was already collected at source (for example through PAYE). If both are true, HMRC will ask you to make Payments on Account towards next year's bill.

How Payments on Account work

Instead of paying one lump sum, HMRC splits an estimated bill for the following tax year into two advance payments, each equal to half of your previous year's tax bill:

31 January — first payment on account, paid alongside your balancing payment for the year just ended
31 July — second payment on account

When you file your return the following January, HMRC works out your actual bill and adjusts: you either pay a top-up balancing payment, or get a refund/credit if you overpaid.

When you don't need to make them

Your Self Assessment bill was £1,000 or less
More than 80% of your total tax owed was already collected through PAYE (for example, if you're mostly employed with a small side income)

Worked example

James's 2025/26 Self Assessment bill came to £4,200, almost entirely from self-employed profits with no PAYE tax collected. Because this is over £1,000 and under 20% was collected at source, HMRC requires two Payments on Account of £2,100 each towards 2026/27 — one due 31 January 2027 alongside his £4,200 balancing payment (total £6,300 due that date), and the second £2,100 due 31 July 2027. Use the Tax Set-Aside Calculator to plan for both dates rather than just January.

Common mistakes

Only budgeting for the January bill. The 31 January payment often includes both your balancing payment AND the first payment on account — effectively 1.5x your tax bill in one go.
Forgetting the July payment entirely, since it comes six months after the January rush.
Not applying to reduce payments when income drops. If you know this year's profit will be lower, you can apply to HMRC to reduce your Payments on Account — but reducing them too far can trigger interest if your actual bill turns out higher.

Tax Set-Aside CalculatorPlan for January and July together Sole Trader Tax CalculatorEstimate this year's likely bill Self Assessment RegistrationNot registered yet? Start here Expense TrackerKeep running totals so nothing surprises you

Sources: GOV.UK — Understand your Self Assessment tax bill. This page is general guidance, not personalised tax advice.

Frequently asked questions

Can I avoid Payments on Account?▾

Not by choice if you meet the criteria (bill over £1,000, under 80% collected at source) — but you can apply to reduce them if you genuinely expect lower income, via your HMRC online account or form SA303.

What if I reduce my payments too much?▾

If your actual bill ends up higher than the reduced payments, HMRC charges interest on the shortfall from the original due date, so only reduce based on a realistic estimate.

Do Payments on Account apply to my first year of self-employment?▾

Yes, if your first year's bill is over £1,000 — this is often what catches new sole traders off guard, since the January bill can be 1.5x what they expected.

Is the second payment always the same as the first?▾

Yes, by default both payments on account are exactly half of your previous year's total tax bill, split evenly between January and July.