What are payments on account?
‘Payments on account’ are advance payments towards your tax bill, which you pay to HMRC.
They are designed to help spread the cost of your tax bill. Each payment is around half your previous year’s tax bill (including national insurance if you’re self-employed).
- 31 January
- and 31 July
Do I need to make a payment in July?
- Your last self assessment tax bill was more than £1,000
- And you haven’t already paid more than 80% of the tax you owe at source (for example if you've paid this through PAYE).
Reducing your payments on account
Because ‘payments on account’ are based on your previous year’s tax bill, HMRC is predicting that your current income will be at least equal to your past income. However, if your income has reduced you can apply to have your payments on account reduced.
If you can send in your tax return early, the payment on account due on 31 July will be automatically adjusted once the return is processed. It can therefore help to get your taxes filed early if you know your profits have reduced, for example because of COVID.
- Sign in to your online HMRC account
- Select the option to view your latest self assessment return
- Select ‘Reduce payments on account’
Typical reasons for asking HMRC to reduce your payments on account include:
- Your business profits are down
- Your other income has gone down
- Your tax allowances and reliefs have gone up
- The tax you have deducted from income at source is more than it was in the previous tax year