Self Assessment Payments on Account 2026/27 — How to Calculate and When to Pay
Payments on account are advance payments towards next year's tax bill, each worth 50% of your prior-year liability. Due 31 January and 31 July each year. Here's how they work, when to reduce them, and how to avoid nasty surprises.
What are payments on account?
Payments on account are a mechanism to spread your Self Assessment tax payments throughout the tax year, rather than paying everything in one lump sum in January. HMRC introduced them to improve cash flow for the Exchequer and to help taxpayers avoid a very large bill once a year.
The system works like this:
- You file your Self Assessment return for the previous tax year
- HMRC calculates your total liability
- You pay the balancing payment by 31 January
- You also make the first payment on account for the current year on the same date (31 January)
- You make the second payment on account on 31 July
Each payment on account is 50% of your prior year's liability (income tax plus Class 4 NI, minus any tax already deducted at source such as PAYE or bank interest withholding).
Who has to make payments on account?
You must make payments on account if both of the following conditions are met:
- Your last Self Assessment tax bill was £1,000 or more
- Less than 80% of your income tax was collected at source (via PAYE, bank withholding, or similar)
If your prior year bill was under £1,000, or if 80% or more of your tax was deducted at source, you do not need to make payments on account — you simply pay one annual balancing payment in January.
Examples of who typically makes POA
| Taxpayer type | Likely to make POA? |
|---|---|
| Self-employed sole trader | Yes |
| Director of limited company (dividends) | Yes |
| Employee with only PAYE income | Usually No |
| Landlord with rental income (no PAYE) | Yes |
| Higher earner with investment income | Often Yes |
| Employee with large untaxed bonus | Depends on amounts |
The payment timeline — key dates in 2026 and 2027
| Date | What you pay |
|---|---|
| 31 January 2026 | Balancing payment for 2024/25 + 1st POA for 2025/26 |
| 31 July 2026 | 2nd payment on account for 2025/26 |
| 31 January 2027 | Balancing payment for 2025/26 + 1st POA for 2026/27 |
| 31 July 2027 | 2nd payment on account for 2026/27 |
Second payment on account — 31 July 2026
If you were in Self Assessment for 2024/25 and had a bill of £1,000 or more, your second payment on account for 2025/26 is due 31 July 2026. This is based on 50% of your 2024/25 liability.
Example: Your 2024/25 Self Assessment bill (after PAYE) was £6,000.
- First POA for 2025/26: £3,000 (paid 31 January 2026)
- Second POA for 2025/26: £3,000 (due 31 July 2026)
How to calculate your payment on account
The calculation is straightforward:
Each POA = (Prior year income tax + Prior year Class 4 NI) / 2
Note: Class 4 NI is included but Class 2 NI is NOT included in POA calculations (Class 2 is paid in the balancing payment).
| Your 2024/25 liability | First POA (31 Jan 2026) | Second POA (31 Jul 2026) | Total POA |
|---|---|---|---|
| £2,000 | £1,000 | £1,000 | £2,000 |
| £5,000 | £2,500 | £2,500 | £5,000 |
| £10,000 | £5,000 | £5,000 | £10,000 |
| £20,000 | £10,000 | £10,000 | £20,000 |
The January double-payment shock
Many new Self Assessment taxpayers are shocked to discover that their first January after joining the system involves two payments:
- The balancing payment for the year just ended
- The first POA for the current year
Example: You set up as a freelancer in 2024/25. Your first Self Assessment bill is £4,000. On 31 January 2026 you owe:
- Balancing payment for 2024/25: £4,000
- First POA for 2025/26: £2,000
- Total due on 31 January 2026: £6,000
Then you owe a further £2,000 on 31 July 2026. Budget for this well in advance.
How to reduce payments on account (SA303)
If you expect your income to be lower in the current tax year than the previous year, you can apply to reduce your payments on account. This is done via form SA303 (available online through your HMRC Self Assessment account or as a paper form).
You can reduce to any amount — including zero — if you genuinely believe your liability will be lower.
Reasons you might reduce POA
- Your self-employment income has fallen
- You expect a large pension contribution to reduce your taxable income
- A rental property has been sold or is vacant
- You are going part-time or retiring mid-year
- Investment income is lower this year
The risk of over-reducing
If you reduce your POA and your actual bill is higher than expected, HMRC will charge late payment interest on the shortfall from the date the POA was originally due. This is not a penalty — but it can add up.
Example: You reduce your second POA from £3,000 to £1,500 (saving £1,500 on 31 July 2026). Your actual bill turns out to be the same as last year. HMRC charges interest on £1,500 from 31 July 2026 to the date of the balancing payment (31 January 2027) — approximately 184 days at 7.0% = approximately £53. Not catastrophic, but worth knowing.
The balancing payment
After you file your Self Assessment return (online deadline: 31 January), HMRC calculates your actual liability. The balancing payment is:
Actual liability minus total POA already paid
If the result is positive, you owe the balance by 31 January. If negative, HMRC owes you a refund.
Balancing payment example
| Figure | Amount |
|---|---|
| Actual 2025/26 tax + Class 4 NI | £9,500 |
| First POA paid (31 Jan 2026) | -£3,000 |
| Second POA paid (31 Jul 2026) | -£3,000 |
| Balancing payment due | £3,500 |
| New first POA for 2026/27 | £4,750 |
| Total due 31 January 2027 | £8,250 |
What if you cannot pay by the deadline?
Late payment of POA is treated the same as late payment of a balancing payment:
- Interest accrues immediately at Bank Rate + 2.5% (~7.0%)
- 30 days late: 5% late payment penalty on the unpaid amount
- Contact HMRC proactively to set up a Time to Pay arrangement before the 30-day mark
Do not ignore the deadline. Even a partial payment reduces the amount on which interest accrues.
MTD ITSA and the future of payments on account
From April 2026, Making Tax Digital for Income Tax Self Assessment (MTD ITSA) requires self-employed people and landlords with income over £50,000 to keep digital records and submit quarterly updates to HMRC. The threshold drops to £30,000 from April 2027.
MTD ITSA does not abolish payments on account, but it changes the reporting cadence. Quarterly updates will give HMRC (and you) a more current view of your income, potentially allowing more accurate POA calculations.
The annual end-of-period statement and final declaration replace the current Self Assessment return for those within MTD ITSA.
Practical tips for managing payments on account
- Set aside 25-30% of every self-employed invoice into a separate savings account earmarked for tax.
- Note the July deadline — it falls in summer when many people are less focused on finances.
- Review your income in April — as soon as the new tax year starts, estimate whether this year will be higher or lower than last. If lower, file SA303 promptly.
- File your return early — the sooner you file, the sooner you know your balancing payment and can plan for January.
- Use HMRC's Budget Payment Plan — you can make voluntary weekly or monthly contributions towards your next bill via direct debit, smoothing the cash flow impact.
Related calculators
Use the income tax calculator to estimate your annual Self Assessment liability and work out your expected payments on account.
The take-home pay calculator helps you model your net income from self-employment alongside any employed income.
Frequently asked questions
What are payments on account for Self Assessment?
Payments on account are advance payments towards your next year's income tax and Class 4 NI bill. Each payment is 50% of your prior year's total liability (tax + NI minus any tax deducted at source). They are due on 31 January and 31 July each year.
Do I have to make payments on account?
You must make payments on account if your last Self Assessment bill was £1,000 or more, AND less than 80% of your tax was collected at source (e.g. via PAYE). If either condition is not met, you do not need to make payments on account.
Can I reduce my payments on account?
Yes. If you expect your current year's tax bill to be lower than last year's, you can apply to reduce payments on account using form SA303 (online or paper). You must have a reasonable belief your income is lower. HMRC can charge interest if you reduce too much and the final bill is higher.
When is the second payment on account due for 2025/26?
The second payment on account for the 2025/26 tax year is due on 31 July 2026. This is 50% of your 2024/25 Self Assessment liability (excluding any balancing payment).
What is a balancing payment?
After you submit your Self Assessment return, HMRC calculates your actual tax liability. The balancing payment is the difference between your actual liability and the two payments on account you have already made. It is due on 31 January following the end of the tax year.
What happens if I overpay via payments on account?
If your payments on account exceed your actual liability, HMRC will refund the excess, plus repayment interest at Bank Rate minus 1% (approximately 3.5% in 2026). The refund is usually applied to your January payment or returned to your bank account.
Try the calculators
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