If your Self Assessment bill is higher than expected or appears to have been divided into two instalments, you are probably being asked to make payments on account.
Payments on account are advance payments towards your next Self Assessment tax bill. HMRC normally divides them into two equal instalments, with one due on 31 January and the other on 31 July.
This can be particularly confusing when you complete your first tax return. It may appear that HMRC is charging you twice, but the additional amount is being credited towards the following tax year.
If you want to speak to a professional accountant at King & Taylor give us a call on 01474 569 777 or contact us here.
What are payments on account?
Payments on account are advance payments towards the Income Tax and, where applicable, Class 4 National Insurance you are expected to owe for the current tax year.
Because HMRC does not yet know what your final income and expenses will be, it usually estimates your next bill using the amount owed for the previous year.
Your estimated bill is then divided into two equal payments:
- First payment on account: Due by 31 January
- Second payment on account: Due by 31 July
Each payment will normally equal 50% of the relevant tax owed through your previous Self Assessment return. Self Assessment Deadlines 2026: Key UK Tax Dates You Need To Know.
Why does HMRC split the bill into two payments?
The payment-on-account system allows HMRC to collect tax closer to the period in which the income is earned. It also spreads the estimated cost across two instalments instead of leaving the entire amount until the following January.
For example, payments made in January and July 2027 would contribute towards the tax you owe for the 2026/27 tax year.
Once your final return has been completed, HMRC compares your actual bill with the payments already made. You will then either:
- Pay a balancing payment if you have not paid enough
- Receive a refund or credit if you have paid too much
- Have nothing further to pay for that year if the estimate was correct
Am I paying my tax twice?
No. Although it can initially look like you are being charged twice, the second amount is an advance payment towards your next bill.
The confusion usually arises in the first year that payments on account apply. On 31 January, you may need to pay:
- Your full tax bill for the year that has ended
- Your first payment on account towards the following tax year
This means your January payment can be considerably higher than the tax bill shown on your return.
Example of payments on account
Suppose your first Self Assessment tax bill for the 2025/26 tax year is £4,000 and you have not previously made any payments on account.
Your payment schedule would normally be:
- 31 January 2027: £4,000 for your 2025/26 bill, plus a £2,000 first payment on account for 2026/27
- 31 July 2027: A second £2,000 payment on account for 2026/27
You would therefore pay £6,000 in January and another £2,000 in July.
The two £2,000 payments are not additional tax on your 2025/26 income. Together, they represent an estimated £4,000 paid towards your 2026/27 bill.
If your actual 2026/27 bill is exactly £4,000, those payments will have covered it. However, you may still need to make the first payment on account towards the next tax year in January 2028.
What is a balancing payment?
A balancing payment becomes due when your two payments on account do not fully cover your final tax bill.
For example, imagine you made two payments on account of £2,000, paying £4,000 in total. After completing your return, your actual bill is calculated as £5,000.
You would need to make a £1,000 balancing payment by the following 31 January. Your first payment on account for the next tax year may also be due on the same date.
If your actual bill is lower than the amount already paid, the excess can normally be refunded or left as a credit on your Self Assessment account.
Does everyone make payments on account?
No. You will not normally need to make payments on account if:
- Your relevant Self Assessment tax bill was less than £1,000
- More than 80% of the tax you owed was already collected outside Self Assessment, such as through PAYE
Payments on account commonly affect sole traders, freelancers, landlords and other people whose income is not taxed before they receive it.
Your Self Assessment statement or HMRC online account should confirm whether payments on account apply and show the amounts due.
What is included in payments on account?
Payments on account generally cover:
- Income Tax collected through Self Assessment
- Class 4 National Insurance for self-employed people
They do not normally include amounts such as Capital Gains Tax or student loan repayments. These will usually form part of the balancing payment due after the relevant return has been completed.
Can you reduce your payments on account?
You can ask HMRC to reduce your payments on account if you reasonably expect your next tax bill to be lower.
This may be appropriate if:
- Your self-employed profits have fallen
- You have stopped trading
- Your rental income has decreased
- You expect to receive less untaxed income
- You are entitled to more tax relief
- More of your tax will be collected through PAYE
- Your business has experienced a temporary downturn
You can apply through your HMRC online account or by submitting form SA303. You will need to estimate the amount you expect to owe.
Be careful not to reduce the payments too far. If your eventual bill is higher than your revised payments, HMRC can charge interest on the underpaid amount.
Can you increase your payments on account?
If you expect your income or profits to increase, you can make additional payments towards your Self Assessment account. This can help you budget for a larger bill and reduce the balancing payment due later.
You do not necessarily have to wait until the payment deadline. Voluntary payments can be made through your HMRC account throughout the year.
What happens if you miss a payment on account?
Interest can be charged when a payment on account is made after its deadline. The interest normally runs from the original due date until the outstanding amount is paid.
Payment-on-account deadlines should therefore be treated separately from the deadline for submitting your tax return. Even if your return has already been filed, interest may still arise if the required payment is late.
If you cannot pay your bill in full, contact HMRC as soon as possible. Depending on your circumstances, you may be able to arrange a Time to Pay plan.
How can you check your payments on account?
You can review your payments through your HMRC online account:
- Sign in to your HMRC account.
- Open your latest Self Assessment return.
- Select “View statements”.
- Check the payments already made and the amounts still due.
Your statement may include your final tax liability, previous payments, payments on account and any balancing payment. Make sure you check which tax year each amount relates to before making a payment.
How to prepare for payments on account
The first year of payments on account can create a significant cash-flow challenge. It is sensible to put aside a percentage of your income throughout the year rather than waiting until January.
You can also:
- Keep your bookkeeping up to date
- Estimate your taxable profit regularly
- Complete your return soon after the tax year ends
- Review your payments on account if your income changes
- Save towards your bill using a separate bank account
- Speak to an accountant before reducing an HMRC payment
Filing early does not usually mean you have to pay immediately. It simply gives you more time to understand the amount due and prepare for the deadline.
Frequently asked questions
Why is my January Self Assessment payment so high?
Your January payment may include your outstanding tax for the previous year, a balancing payment and the first payment on account towards the next tax year. This is why the amount due can be higher than the tax figure you expected.
Why do I have another tax payment due in July?
The payment due on 31 July is normally your second payment on account. It contributes towards the same estimated tax bill as the first payment made in January.
Will I always have to make payments on account?
Payments on account may continue each year while your Self Assessment liability meets HMRC’s criteria. They may stop if your bill falls below £1,000 or more than 80% of your tax is collected outside Self Assessment.
What happens if my income is lower next year?
You may be able to reduce your payments on account. However, the reduction should be based on a realistic estimate because interest can be charged if you reduce them too far.
Do payments on account include Capital Gains Tax?
Capital Gains Tax is not normally included when calculating payments on account. Any Capital Gains Tax due will generally be included in your balancing payment.
Can an accountant reduce my payments on account?
An authorised accountant can review your expected income and submit a request to reduce the payments on your behalf. They can also help you calculate a reasonable figure and avoid reducing the payments unnecessarily.
Need help understanding your Self Assessment bill?
Payments on account can be confusing, particularly when they apply for the first time or your income changes significantly between tax years.
King & Taylor can review your Self Assessment calculation, explain exactly what each payment relates to and determine whether your payments on account could reasonably be reduced.
As an established firm of chartered accountants in Gravesend, we support sole traders, landlords, freelancers and business owners throughout Kent. Contact our team to discuss your Self Assessment return and upcoming tax payments.
