If you’ve ever looked at your Self Assessment tax bill and thought
“Why am I paying tax for a year that hasn’t even finished yet?”
then you’ve met Payments on Account.

They’re one of the most confusing parts of Self Assessment — and one of the biggest causes of January panic. So let’s break them down properly, without the jargon.

What are Payments on Account?

Payments on Account are advance payments towards your next tax bill.

Instead of paying all your tax once a year, HMRC sometimes asks you to pay it in two instalments, based on what you owed last time.

These payments apply to many:

• Sole traders
• Self-employed individuals
• Landlords
• People with untaxed income

They usually don’t apply if:

• Your last Self Assessment bill was under £1,000, or
• You paid more than 80% of your tax at source (for example, through PAYE)

When do you pay Payments on Account?

There are two payment dates each year:

• 31st January
• 31st July

Each Payment on Account is normally 50% of your previous year’s tax bill (excluding things like Capital Gains Tax and student loan repayments).

So instead of one big bill, HMRC spreads it across:

• January
• July
• And sometimes the following January too

A simple example (because examples help)

Let’s say your tax bill for the year comes to £6,000.

In the January after that tax year, you may be asked to pay:

• £6,000 for the tax you owe for that year, plus
• £3,000 as your first Payment on Account for the next year

Total due on 31st January: £9,000

Then on 31st July, you’ll pay:

• £3,000 as your second Payment on Account

This is why January can feel so painful — you’re often paying more than one year’s tax at the same time.

But what if you earn less this year?

Good question — and this is really important.

If you know your income is going to be lower than the previous year, you may be able to reduce your Payments on Account.

However:

• Reducing them too much can lead to interest charges if you underpay
• It should be done carefully, based on realistic figures

This is definitely an area where advice can save you money (and stress).

Why do Payments on Account catch people out?

In our experience, it’s usually because:

• They weren’t explained properly in the first place
• The focus was on the tax return, not the cash flow impact
• The January bill was higher than expected

Payments on Account aren’t extra tax — but they feel like it if you’re not prepared.

A friendly reminder from us…

We really do try to warn you

But Payments on Account are one of those things that only truly make sense after you’ve experienced them once.

What we can do is:

• Explain them in advance
• Tell you what’s coming and when
• Help you plan so January and July aren’t a shock

What we can’t do is magically make them disappear.

(We’ve asked. HMRC said no.)

Planning ahead makes all the difference

Payments on Account are much easier to deal with when you:

• Set money aside regularly
• Understand what your next bill is likely to be
• Review things before January rolls around

If you’re unsure whether Payments on Account apply to you, whether they can be reduced, or how much you should be saving, that’s exactly the sort of thing we help with every day.

And yes — we’ll explain it like humans, not tax manuals.

Payments on Account