by Asim Abbas
11 November 2026 
Payments on account explained, and how to reduce them
Payments on account explained, and how to reduce them
Your first January tax bill as a self-employed person is often much bigger than you expect. That’s because of payments on account.
- Payments on account are advance payments towards next year’s tax
- You make them if your bill is over £1,000
- Each one is half of last year’s bill, due 31 January and 31 July
- You can reduce them if your income has fallen
They’re advance payments towards next year’s tax bill, and they catch out new sole traders and landlords every year.
This guide explains how they work, who has to make them, and when you can reduce them.
What are payments on account?
Payments on account spread your tax bill through the year, a bit like PAYE does for employees. Each payment is half of your previous year’s bill.
- First payment: 31 January, during the tax year
- Second payment: 31 July, after the tax year ends
- Balancing payment: the following 31 January, for anything still owed
Who has to make them?
You make payments on account if your last Self Assessment bill was more than £1,000. You don’t have to if more than 80% of your tax was already collected at source, for example through PAYE on a salary.
They cover Income Tax and Class 4 National Insurance. They don’t include Capital Gains Tax or student loan repayments, which are paid in full in the balancing payment.
Your 2025/26 bill is £6,000 and it’s your first year. On 31 January 2027 you pay £6,000 for 2025/26 plus £3,000 towards 2026/27, so £9,000. On 31 July 2027 you pay another £3,000. If your 2026/27 bill turns out to be £7,000, you pay the extra £1,000 on 31 January 2028.
Self Assessment tax calculator
Estimate this year’s bill before you decide to reduce.
When can you reduce them?
If you expect this year’s profit to be lower, you can ask HMRC to reduce your payments on account. Common reasons include:
- Your trading profit has fallen
- You’ve stopped letting a property
- You’re paying more into a pension
- You’ve moved from self-employment into a salaried job
How to reduce them
You can reduce them in your HMRC online account, or by sending form SA303. HMRC explains the process on GOV.UK.
Be careful not to reduce them too far
If your final bill is higher than the reduced amount, HMRC charges interest on the difference from the original due dates. If you deliberately reduce them too far, penalties can apply too.
Fixed-fee accountancy support
Transparent monthly packages for sole traders, landlords and limited companies. Fixed fees agreed upfront, VAT included.
Get a fixed-fee quoteCall 0161 531 4179Payments on account and Making Tax Digital
Making Tax Digital for Income Tax doesn’t change payments on account. You still pay on 31 January and 31 July. Your quarterly updates do give you a clearer view of profit during the year, which makes reducing them easier to get right. Read more about Making Tax Digital.
What should I do next?
Payments on account are based on it.
Use your bookkeeping or our calculator.
A realistic estimate avoids interest.
Saving 20–30% of profit each month makes January easier. Our self-employed accountants can help you plan.
Frequently Asked Questions
Why is my first January bill so big?
In your first year you pay the full bill for that year plus the first payment on account for the next year, all on 31 January.
Do I pay payments on account on Capital Gains Tax?
No. Capital Gains Tax is paid in full with your balancing payment, or within 60 days for UK residential property.
What if I overpay?
If your payments on account are more than your final bill, HMRC refunds the difference or uses it against your next bill.
Can I stop making payments on account?
They stop automatically if your bill falls to £1,000 or less, or more than 80% of your tax is collected at source. You can also reduce them to zero if you expect no tax to be due.
Can you manage this for me?
Yes. We review your payments on account every year as part of your return, from £150 including VAT.
Need help with this? Wingate Accountants offers fixed-fee online accountancy support across the UK. Call 0161 531 4179 or request a quote at wingateaccountants.co.uk.
About the Author
Ali Imran
I’m Ali Imran, an accountant at Wingate Accountants. I help sole traders, landlords and directors get their returns filed early and accurately, without the last-minute panic.
