Answers · UK 2025/26
Why is my first Self Assessment bill so much bigger than I expected?
Because your first January payment can be 150% of one year's tax. You pay the full balancing tax for the year just ended plus a first payment on account of 50% toward the next year, due the same day. A GBP 4,000 tax bill becomes GBP 6,000 on 31 January, then another GBP 2,000 on 31 July.
Full answer
Many newly self-employed people are shocked by their first 31 January bill because of payments on account. Once your tax bill tops GBP 1,000 (and under 80% was taxed at source), HMRC asks you to pre-pay toward the following year in two instalments of 50% each. Worked example: Owen's first full year of trading is 2025/26 with a tax-plus-Class-4-NI bill of GBP 4,000. On 31 January 2027 he must pay: the GBP 4,000 balancing payment for 2025/26, plus a first payment on account of GBP 2,000 (50%) toward 2026/27 - a total of GBP 6,000. Then on 31 July 2027 he pays the second payment on account of GBP 2,000. So in his first cycle he hands over GBP 8,000 across two dates even though his actual 2025/26 liability was only GBP 4,000. The extra is credit sitting against 2026/27, after which the system levels out. Class 4 NI inside that bill is 6% on profits between GBP 12,570 and GBP 50,270, then 2% above. If you expect lower profits next year, you can apply to reduce the payments on account, but do not under-claim or HMRC charges interest. Budget for roughly 1.5 times your first-year tax to avoid a cash-flow crunch. The self-employed tax calculator projects both the balancing payment and the payments on account. Understand the breakdown at gov.uk/understand-self-assessment-bill.
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This answer is informational only and does not constitute financial, tax or legal advice. Figures are for the 2025/26 UK tax year. See our methodology and sources.