Pillar Guide · Updated July 2026
Self Assessment Payments on Account: A Complete UK Guide for 2026/27
Payments on account catch out more newly self-employed people than almost any other part of Self Assessment, because the first year can mean paying one and a half years of tax in a single January bill. This guide explains exactly how the two-instalment system works, who it applies to, and how to reduce a payment if your income has genuinely fallen.
What Payments on Account Are
Payments on account are two advance instalments toward your next Self Assessment tax bill, each normally set at 50% of your Income Tax and Class 4 National Insurance liability for the previous tax year. Together they add up to 100% of that prior year's relevant liability, paid in advance during the current year rather than as a single lump sum after the year has already ended. The logic is similar to how PAYE spreads tax through the year for employees — payments on account try to achieve something similar for people whose income is not taxed at source, so that HMRC (and the taxpayer) are not left with the entire year's tax due in one go, long after the income was earned and potentially spent.
Who Has to Make Them
You are normally required to make payments on account if your Self Assessment bill for the previous tax year was more than £1,000, unless more than 80% of the tax you owed for that year was already collected at source — most commonly through PAYE on employment or pension income. This 80% test matters in practice: someone with a full-time PAYE job and a modest amount of untaxed freelance income on the side may have a Self Assessment bill over £1,000 in total, but if the large majority of their overall tax liability is already being deducted through their main job's payroll, they can fall outside the payments-on-account requirement. People whose income is mostly or entirely untaxed at source — typical of sole traders, many landlords, and higher earners with substantial dividend or other untaxed income — are much more likely to be caught by the requirement.
Deadlines and the January "Double Payment"
The first payment on account is due by 31 January — the same date as the Self Assessment online filing deadline and, in the first year you become liable, the same date as the balancing payment for the year you have just filed. The second payment on account is due by 31 July. Both deadlines are fixed by tax year, not by when you personally choose to file your return, so filing in April instead of the following January does not move the July payment forward.
This structure produces the well-known "double payment" shock in your first year of significant Self Assessment liability: the January bill combines the balancing payment for the year just finished with the first payment on account (50% of that same year's liability) toward the year ahead — effectively one and a half years of tax due at once. Anyone newly self-employed, or newly required to file Self Assessment for another reason, should plan cash flow around this specifically rather than assuming the January bill will simply match the tax due on the year just reported.
The Balancing Payment
The balancing payment is the difference between your actual, finalised tax liability for a tax year (calculated once you submit that year's return) and the two payments on account you already made toward it during the year. If your actual liability comes out higher than the payments on account covered — for example because your income grew during the year — you pay the extra as a balancing payment, due by the following 31 January. If your actual liability comes out lower — for example because your income fell, or you claimed more allowable expenses or reliefs than expected — the overpayment is refunded or credited against your account instead.
Reducing a Payment on Account
If you reasonably expect your current year's tax liability to be lower than the previous year's — because of a genuine drop in income, a change in circumstances, or newly available reliefs — you can apply to reduce your payments on account, either through your online Self Assessment account or by submitting form SA303. This is a legitimate and commonly used option, particularly for people whose income fluctuates significantly year to year, but the reduction must be based on a genuine, reasonable estimate of your actual liability. If you reduce the payments too far and your real liability for the year turns out higher than what you actually paid, HMRC can charge interest on the shortfall between what you should have paid on account and what you did pay, calculated from the original due date.
What Is Excluded
The payments-on-account calculation is generally based on Income Tax and Class 4 National Insurance only — it typically excludes Class 2 National Insurance, Capital Gains Tax, and student loan repayments collected through Self Assessment. Capital Gains Tax in particular is usually reported and paid on its own separate timetable, including the 60-day UK Property Account reporting and payment window that applies to most UK residential property disposals — so a large one-off capital gain does not, by itself, inflate the following year's payments on account in the way a rise in regular trading or rental profit would.
Late Payment and Interest
HMRC charges daily interest on any Self Assessment amount paid after its due date, including payments on account, running from the due date until the date payment is actually received — so even a payment made just a few days late accrues some interest. Formal late-payment penalties (distinct from interest) are generally structured around the final balancing payment deadline rather than applied automatically to a late payment on account in isolation, but relying on that distinction is not a reason to delay — interest starts accruing immediately regardless of whether a separate penalty is triggered.