Self Assessment payment on account explained

What payments on account are

Payments on account are advance payments towards your next Self Assessment bill. HMRC uses them to spread the cost of tax that is not collected at source, such as tax on self-employment profits, rental profits or dividends.

There are normally two payments: one due by 31 January and one due by 31 July. Each payment is usually half of the tax you owed for the previous year.

When you usually have to make them

You usually need to make payments on account unless your previous Self Assessment bill was less than £1,000, or more than 80% of the tax you owed was already collected outside Self Assessment, for example through PAYE.

Your HMRC online account or Self Assessment statement should show whether payments on account are due and how much to pay.

Why the January bill can feel bigger than expected

January can include two amounts: the balancing payment for the tax year just filed, plus the first payment on account for the following tax year. If it is your first year with a meaningful Self Assessment bill, this can make the first January payment feel like one and a half years of tax.

Can you reduce payments on account?

If you know your next tax bill will be lower, you can ask HMRC to reduce your payments on account. This should be based on a realistic forecast, not a guess. If you reduce them too far and the final bill is higher, HMRC can charge interest on the difference.

Practical planning tip

Treat payments on account as part of your cash-flow plan, not as a surprise. For landlords, sole traders and directors with dividends, a simple monthly tax reserve can make the January and July deadlines much easier to manage.

For the official rules, see GOV.UK guidance on payments on account.