Can I reduce my payments on account to HMRC?

Full answer

Payments on account are advance instalments toward your Self Assessment tax bill. HMRC requires them if your previous year's bill (Income Tax plus Class 4 National Insurance, excluding amounts already collected through PAYE) was GBP 1,000 or more and less than 80% of your tax was deducted at source. You pay two instalments, each 50% of the prior year's liability, due 31 January and 31 July, with any balance ('balancing payment') settled the following 31 January. Why reduce them: the instalments are based on last year, so if your income has fallen - fewer clients, a career break, lower self-employed profits - you could be overpaying and tying up cash unnecessarily. You can claim to reduce both instalments to a lower amount you genuinely expect to owe. How to do it: log in to your HMRC online Self Assessment account and use the 'reduce payments on account' option, or submit form SA303. State the revised figure for each instalment. You can do this before or after a payment falls due. The risk: if you reduce the payments below what you actually end up owing, HMRC charges interest on the difference from the original due dates, as though the full amount had always been due. So reducing is sensible only when you have a realistic, lower estimate - not as a way to defer tax you will owe anyway. Worked illustration: if last year's liability was GBP 8,000, each payment on account is GBP 4,000. If you expect this year's profits to halve so your bill will be about GBP 4,000, you could reduce each instalment to roughly GBP 2,000. To estimate your likely bill before deciding, use a self-employed tax or income tax calculator with your expected profit for 2026/27.

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