Self Assessment payments on account - what is a payment on account and how do I pay it to HMRC?

What is a payment on account?

Payments on account are advance payments made by self-employed, self assessment workers towards their future tax bill.

These payments are paid to HMRC twice a year––on 31 January and 31 July––and are designed to help spread the cost of your tax bill.

How are payments on account calculated?

Payments on account are calculated based on your previous year's tax bill (including national insurance if you’re self-employed) and each payment is about half of that previous year's bill.

You don't need to make a payment in account in your first year

But the tax is still payable at some point!

For anyone newly self-employed who has just submitted their first tax return, your first tax bill can be much higher than expected, because you have to pay both the previous year's tax bill, as well as half of next year's tax bill by 31 January. This would be your first payment on account, and after that initial bill, you'll be spreading the payments every six months, so it helps with budgeting for tax.

Do I have to pay HMRC a payment on account?

Not everybody needs to make payments on account. Some people with a small amount due just need to pay what they owe by 31 January after the tax year ends.

HMRC will only ask you to make payments on account if:

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).

If you need to make payments on account, HMRC will tell you this on your self assessment statement.

When do I need to make a payment on account?

If you need to make payments on account, you need to do this twice a year before midnight on:

31 January
31 July

How do I make a payment on account?

You can make a payment via the HMRC website.

If you're an untied Pro user, we make payments on account super easy for you.

If you're not already an untied user, you can signup here

Can I reduce my payment 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 too.

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, for example, if you've moved to doing more full time employment.

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.

Alternatively you can ask HMRC to reduce your payments online or by post.

HMRC will ask you to confirm the reduced amount you want to pay. This should be equal to half the tax and class 4 national insurance you expect to have to pay for the year.

Remember payments on account are designed to help spread the cost of your tax bill - even if you're not paying HMRC you may want to set some money aside to cover what you'll need to pay.