Payments on Account Calculator

Payments on account are advance payments HMRC asks Self Assessment taxpayers to make towards next year’s tax bill. There are two each year — due 31 January and 31 July — and each one is half of your previous year’s Income Tax and Class 4 National Insurance bill. They exist because, unlike employees on PAYE, self-employed people would otherwise pay their tax up to 22 months after earning the income.

You must make payments on account if your last Self Assessment bill (Income Tax plus Class 4 NI) was £1,000 or more, unless 80% or more of the tax you owed for that year was already collected at source — for example through PAYE on a salary or pension. If your bill was under £1,000, or you’re mostly taxed at source, you simply pay everything in one go on 31 January.

Each payment is half of last year’s Income Tax and Class 4 National Insurance liability. Capital Gains Tax and student loan repayments are excluded — they never form part of a payment on account and are always settled with your balancing payment on 31 January. That’s why this calculator asks you to split those amounts out of your bill.

Yes. If you expect your income — and therefore your tax bill — to be lower this year, you can apply to reduce your payments on account, either online through your HMRC account, on your tax return, or using form SA303. Be careful though: if you reduce them by too much and your actual bill turns out higher, HMRC charges interest on the shortfall from the date each payment was originally due.

When your actual bill for the year is worked out, HMRC compares it with the two payments on account you’ve already made. If you owe more, the difference — the balancing payment — is due by 31 January, along with any CGT and student loan amounts and your first payment on account for the following year. If you paid too much, HMRC refunds the difference or sets it against your next bill.