Self Assessment Payments on Account: How and When You Can Reduce Them (2026/27)

What payments on account actually are

Self Assessment payments on account exist because HMRC cannot deduct tax at source from most self-employment or rental income the way PAYE deducts tax from employment income throughout the year. To avoid taxpayers building up a single, very large tax bill once a year, HMRC requires most Self Assessment taxpayers with a liability above £1,000 (and less than 80% collected at source) to make two advance instalments towards their next year's bill, each equal to half of the previous year's total liability:

• 31 January: first payment on account for the current tax year, paid alongside the balancing payment for the previous tax year.
• 31 July: second payment on account for the current tax year.

Why you might want to reduce them

Payments on account are calculated purely by reference to your previous year's liability — they take no account of whether your income has since fallen. Common situations where a reduction is genuinely justified include:

• Reduced profits compared with the previous year, for example due to a slower trading period or a change in circumstances.
• Ceasing self-employment partway through the tax year.
• Increased pension contributions or Gift Aid donations, which reduce taxable income and therefore the expected tax liability.
• A one-off item in the previous year's return (such as a large capital gain) that will not recur.

How to make the claim

Reductions can be made online through your personal tax account or Self Assessment portal, or by post using form SA303, specifying the reduced amount for each payment on account and the reason for expecting a lower liability. The reduction can apply to one or both payments, and can be made at any time before or after the original due date, though making it before the due date avoids paying the higher original amount unnecessarily in the first place.

Worked example

Suppose a self-employed taxpayer had a Self Assessment liability of £8,000 for the previous tax year, generating standard payments on account of £4,000 each (due 31 January and 31 July).

Midway through the current tax year, the taxpayer's profits have fallen significantly, and they now reasonably expect their total liability for the current year to be only £5,000.

• Reduced payment on account (each): £5,000 ÷ 2 = £2,500
• Total reduced payments on account for the year: £5,000, matching the newly expected liability, instead of the original £8,000 based on the prior year's higher profits.

This avoids overpaying £3,000 during the year and then waiting for a refund — instead, cash flow better matches the taxpayer's actual, lower expected liability.

The risk of under-estimating

If the taxpayer in the example above actually ends up with a liability of £6,500 (higher than the £5,000 they estimated when reducing), HMRC will charge interest on the £1,500 shortfall, calculated from the original due dates (31 January and 31 July) even though the reduction was requested in good faith. This interest accrues regardless of whether HMRC considers the original estimate reasonable — it is simply the cost of having underpaid tax that was ultimately due.

Where HMRC considers a reduction was made fraudulently or negligently — for example, deliberately understating expected income to reduce cash-flow pressure without any genuine basis — a formal penalty can also be charged in addition to the interest, making it important that any reduction is based on a realistic, defensible estimate rather than simple wishful thinking.

The knock-on effect on the following January's bill

Reducing payments on account too aggressively can create a larger-than-expected balancing payment the following 31 January, since that payment covers both any shortfall from the current year's actual liability versus the reduced payments made, plus the first payment on account for the year after that. Taxpayers considering a reduction should model the likely combined effect on the following January's total payment, not just the immediate cash-flow relief of a lower payment now.