Answers · UK 2025/26
Why is my first self-assessment tax bill so much higher than expected?
Because of payments on account. In your first year you pay the full tax owed plus 50% of it again as an advance toward next year, so the bill is effectively 150% of your tax due. The second 50% follows on 31 July, meaning you fund roughly 200% across the year.
Full answer
Payments on account catch out most new sole traders. HMRC asks you to prepay next year's tax in two instalments, each 50% of your current bill, on 31 January and 31 July. You only avoid them if your last tax bill was under GBP 1,000 or more than 80% was collected at source. Worked example: a sole trader has taxable profit of GBP 50,270 for 2026/27. After the GBP 12,570 Personal Allowance, GBP 37,700 is taxed at 20% basic rate, giving GBP 7,540 income tax. Class 4 NI is 6% on profit between GBP 12,570 and GBP 50,270, so 6% of GBP 37,700 = GBP 2,262. Total due is GBP 9,802. (Class 2 NI is no longer separately charged for most.) On the first 31 January you pay that GBP 9,802 balancing payment PLUS a first payment on account of GBP 4,901 (50%), totalling GBP 14,703. Then on 31 July you pay a second GBP 4,901. So in your first 18 months you hand over GBP 19,604 against GBP 9,802 of actual liability. The advance payments are credited against next year, so it evens out, but the initial cash hit is brutal. If you know profits are falling, you can apply to reduce payments on account, but underpaying triggers interest. Use the self-employed tax calculator to estimate the full bill including both instalments, and set aside cash early. Always confirm thresholds and your specific position at gov.uk.
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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.