Payments on Account

Payments on Account are advance payments towards your next year's Self Assessment tax bill. If your tax bill (excluding certain amounts) exceeds £1,000, HMRC expects you to pay half of that bill in advance — on 31 January and 31 July — to spread the cost across the year. This guide explains who must make payments on account, how they are calculated, and how to reduce or cancel them if your income has fallen.

Who Must Make Payments on Account

You must make payments on account if your Self Assessment tax bill (for Income Tax and Class 4 National Insurance) is more than £1,000. You do not need to make payments on account if you paid less than £1,000 in tax, or if more than 80% of your tax was deducted at source (for example, through PAYE). Payments on account do not include Capital Gains Tax, student loan repayments, or the High Income Child Benefit Charge — these are paid as part of the balancing payment on 31 January. The threshold applies to your total Income Tax and Class 4 NIC liability after any tax deducted at source.

How Payments on Account Are Calculated

Each payment on account is half of your previous year's tax bill (excluding certain items such as Capital Gains Tax and student loan repayments). For example, if your 2025/26 tax bill (Income Tax and Class 4 NIC) is £4,000, your payments on account for 2026/27 would be £2,000 each — one due on 31 January 2027 and the other on 31 July 2027. The total payments on account amount to £4,000, which equals the previous year's bill. Then, when you file your 2026/27 return (by 31 January 2028), HMRC compares the payments on account you made with the actual tax due. If you overpaid, you receive a refund. If you underpaid, you pay the difference as a balancing payment.

Payment Dates

The two payment on account dates are 31 January (during the tax year — so 31 January 2027 for the 2026/27 tax year) and 31 July (after the tax year ends — 31 July 2027 for the 2026/27 tax year). These are fixed dates and apply regardless of when you file your return. If you file your return after 31 January but before 31 July, the second payment on account is still due on 31 July. If you file after 31 July, both payments on account have already fallen due and any underpayment is payable immediately.

Reducing Payments on Account

If you know your income will be lower in the current tax year than the previous year, you can apply to HMRC to reduce your payments on account. You do this by logging into your HMRC online account, navigating to the "Payments on Account" section, and entering the reduced amount. You must provide a reason, such as reduced self-employed profits, lower rental income, or increased pension contributions. Be careful: if you reduce your payments on account and your actual tax bill turns out to be higher, HMRC will charge you interest on the underpaid amount from the original due date. Interest is charged at the Bank of England base rate plus 2.5%. You cannot reduce payments on account below nil.

Example Calculation

Emma files her 2025/26 Self Assessment return in June 2026. Her total Income Tax and Class 4 NIC is £6,000. HMRC calculates her payments on account for 2026/27 as £3,000 each. She pays £3,000 on 31 January 2027 and £3,000 on 31 July 2027. In November 2027, Emma files her 2026/27 return. Her actual tax bill is £5,500. She has already paid £6,000 in payments on account, so she receives a refund of £500. If her actual bill had been £7,000, she would owe £1,000 as a balancing payment by 31 January 2028.

What Is Excluded from Payments on Account

Payments on account only cover Income Tax and Class 4 National Insurance. The following amounts are not included and must be paid in full by the 31 January deadline: Capital Gains Tax, Student Loan repayments, the High Income Child Benefit Charge, and any tax underpaid from previous years. If you have any of these liabilities, always check your HMRC online account for the full amount due on 31 January, rather than relying solely on the payments on account calculation.

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