Payment on Account Explained

How Payments on Account Work

Payments on account are advance payments towards your Income Tax bill. Instead of paying the entire year’s tax in one lump sum, HMRC collects it in two instalments during the year.^[1]

You’ll need to make payments on account if your most recent Self Assessment tax bill was £1,000 or more and less than 80% of your tax was deducted at source (e.g. through PAYE).

How Are They Calculated?

Each payment on account is 50% of your previous year’s tax bill (excluding any tax already deducted at source).^[1]

Example: Your 2025/26 Self Assessment tax bill is £6,000. Your payments on account for 2026/27 are:

First payment (31 Jan 2027): £3,000
Second payment (31 Jul 2027): £3,000
Total advance payments: £6,000

If your actual 2026/27 bill turns out to be £7,200, you pay the remaining £1,200 as a balancing payment by 31 January 2028.

When Are They Due?

There are two payment dates each year:^[1]

Payment	Due Date	Amount
First Payment on Account	31 January (during the tax year)	50% of previous year’s bill
Second Payment on Account	31 July (during the tax year)	50% of previous year’s bill
Balancing Payment	31 January (following the end of the tax year)	Any remaining tax owed

Note: The 31 January deadline is a busy date. On 31 January 2028 you could owe:

The balancing payment for 2026/27
The first payment on account for 2027/28

Plan ahead so you’re not caught off guard.

How to Reduce Payments on Account

If you expect your current year’s tax bill to be lower than last year’s, you can apply to reduce your payments on account.^[1]

You can do this:

Through your HMRC online account
By posting form SA303 to HMRC
Through your accountant or agent

Warning: If you reduce your payments on account and your actual tax bill turns out to be higher than estimated, HMRC will charge interest on the shortfall. Only reduce if you’re confident your income will be lower.^[4]

What Happens If You Overpay?

If your payments on account total more than your actual tax bill, HMRC will either:

Refund the overpayment directly to your bank account, or
Offset it against future tax owed

You can claim a repayment through your HMRC online account once your Self Assessment or Final Declaration is submitted.

Your First Year of Self Assessment

In your first year of Self Assessment, there are no payments on account because there’s no previous year’s bill to base them on.^[2]

However, this means your first 31 January could be expensive: you’ll pay the full year’s tax plus the first payment on account for the following year. It’s worth setting money aside throughout the year.

Payments on Account Under MTD

MTD doesn’t change how payments on account work. Quarterly updates are information reports only — they don’t trigger tax payments. Your tax is still calculated and paid through the existing payment on account system.^[3]

However, MTD does mean you’ll have a clearer picture of your tax position throughout the year, which helps you budget for upcoming payments. MTD Income Tax software shows an in-year tax estimate after each quarterly update.

Frequently Asked Questions

What are payments on account for Self Assessment?

Payments on account are advance payments towards your Income Tax bill, collected in two instalments. Each is 50% of your previous year’s tax bill, due on 31 January and 31 July.

When do I need to make payments on account?

You must make payments on account if your most recent Self Assessment bill was £1,000 or more and less than 80% of your tax was collected at source through PAYE.

Can I reduce my payments on account?

Yes. If you expect your current year’s tax bill to be lower, you can apply to reduce payments on account through your HMRC online account or by posting form SA303. However, HMRC charges interest on any shortfall.

Do payments on account change under Making Tax Digital?

No. MTD quarterly updates are information reports only and do not trigger tax payments. Your tax is still calculated and paid through the same payment on account system.

Sources

Understand your Self Assessment tax bill — GOV.UK
Self Assessment tax returns — GOV.UK
Pay your Self Assessment tax bill — GOV.UK
Interest rates for late and early payments — GOV.UK