Self Assessment payments on account explained
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In short. Payments on account are two advance instalments towards next year's Self Assessment bill, each equal to half of last year's tax. They're due on 31 January and 31 July. HMRC require payments on account when the previous year's Self Assessment bill was over £1,000 and less than 80% of all tax was collected at source (e.g. through PAYE).
Payments on account often surprise first-time filers. The first January after registering can involve paying 150% of one year's tax (the balancing payment plus the first instalment for the next year). The system is set out in HMRC's Self Assessment manuals.
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How the calculation works
If a 2025/26 Self Assessment bill is £4,000 and triggers payments on account, the 31 January 2027 payment is £4,000 balancing payment + £2,000 first payment on account for 2026/27 = £6,000. A further £2,000 second payment on account is due on 31 July 2027.
When the 2026/27 return is filed, the £4,000 already paid on account is netted off; any difference is settled by a balancing payment or refund on 31 January 2028.
When payments on account are NOT required
- Last year's Self Assessment bill was £1,000 or less, OR
- More than 80% of last year's tax was collected at source (typically PAYE), OR
- Class 2 National Insurance is the only Self Assessment liability
Reducing payments on account
Where income has fallen, HMRC's online SA303 form can reduce future payments on account to a realistic estimate of the new year's bill. If the eventual return shows the estimate was too low, interest is charged on the shortfall from each due date.
FAQ
- Why am I being asked to pay tax for a year that hasn't ended?
- Payments on account are an instalment system, not extra tax. HMRC collect the tax for the coming year in two stages to smooth cash flow for both the taxpayer and the Exchequer.
- Can I just pay the whole bill in July to clear the second payment on account?
- Yes — there's no penalty for paying early. Interest on early payments is credited at Bank Rate minus 1 pp (with a 0.5% floor).
- Do payments on account cover Capital Gains Tax?
- No — CGT is not included in the payments-on-account calculation; it falls due in full on the 31 January after the tax year (UK residential property gains have a separate 60-day reporting and payment rule).