Payments on account: how Self Assessment instalments work

Payments on account are payments towards your next tax bill, made in two instalments to spread the cost of your Self Assessment tax. GOV.UK says they cover Income Tax and, if you are self-employed, Class 4 National Insurance.

They are not an extra tax and not a penalty. They are your next bill paid early, in two parts, based on an estimate. When the year’s real figures are known, any difference is settled with a balancing payment or, if you paid too much, a refund.

They matter to anyone who files Self Assessment, which includes sole traders, partners and company directors with income taxed outside PAYE. If you are new to the system, our guide to the UTR number explains the reference HMRC uses to find your record.

Payments on account are due by midnight on 31 January and 31 July. The January payment is the first instalment and the July payment is the second.

As of October 2026, GOV.UK gives 11:59pm on 31 January 2027 as the deadline to pay your Self Assessment tax, with a second payment deadline of 31 July for those making payments on account. The tax year itself runs from 6 April to 5 April, which our guide to UK tax year dates covers in full.

You have to make payments on account unless one of two exceptions applies. GOV.UK says you must make the two payments unless your tax bill last year was less than £1,000, or you paid more than 80% of last year’s tax outside Self Assessment.

Paying outside Self Assessment means, for example, through your tax code or because your bank had already deducted tax on your savings interest. An employee with a small amount of side income often falls into this group, because most of their tax is collected through PAYE.

Your Self Assessment statement or online account shows whether you need to pay them and how much. If you are unsure, check there before the January deadline rather than assuming. Capzy does not give tax advice, so ask your accountant if your position is not clear.

Each payment on account is usually half of the tax you owed for the previous year. HMRC treats last year’s bill as an estimate of this year’s, so you pay on the basis of what you earned before.

The table works through the arithmetic with round, made-up numbers. It is an illustration of how the sums fit together, not a forecast for any business.

If you earn more than last year, the instalments will fall short and you will owe a balancing payment. If you earn less, you may be due a refund. Both outcomes are settled once your return for that year is filed.

The balancing payment is what you still owe once your payments on account are deducted from the full tax bill for the year. It is due by midnight on 31 January the following year, and it can include anything you owe for capital gains or student loans.

This is why January is the heaviest month. If you made payments on account last year, you pay both any balancing payment for last year and your first payment on account for the new year, on the same day. If you did not make payments on account last year, for example because it is your first Self Assessment return, you pay the full tax calculation and the first payment on account together.

Yes. If you know your tax will be lower than last year, you can ask HMRC to reduce your payments on account, either online or by post using form SA303. You need to state the amount you expect so HMRC can recalculate them.

1. Sign in to your HMRC online account.
2. Open your latest Self Assessment return and choose to reduce payments on account.
3. Enter the amount you expect to owe, so that HMRC can work out the new instalments.

If you pay tax late, HMRC charges interest on the amount owed, and penalties apply to late payment of your Self Assessment tax. GOV.UK says that if you pay your tax late you will get penalties of 5% of the tax unpaid at 30 days, 6 months and 12 months, and you will also be charged interest.

Interest rates change, so check the current rate on GOV.UK rather than relying on a figure in an article. Filing your return late carries separate penalties, so paying on time does not replace filing on time.

If you cannot pay in full, contact HMRC before the deadline. A Time to Pay arrangement lets you spread a bill over agreed instalments, and our guide to HMRC debt explains the options if a balance has already built up.

You plan for payments on account by setting money aside from every sale and putting the January and July dates into your forecast. A large first-year bill is the most common shock, because you pay the whole bill and the first instalment together.

• Move a share of each payment received into a separate account for tax.
• Add 31 January and 31 July to your calendar as fixed cash outflows.
• File your return early so you know the figure well before it is due.
• Review your instalments mid-year if profit has clearly changed, and reduce them if the fall is genuine.

A rolling cash flow forecast that includes both dates makes the January figure a planned event rather than a surprise. Sole traders can see how the tax position differs from a company in our guide to what a sole trader is.

Capzy is a credit broker, not a lender, and is paid by the lender. Payments on account are a tax rule, so we do not arrange them, and we do not give tax advice: ask your accountant to confirm what you owe.

Where a business wants to borrow to bridge a gap in cash flow, we can introduce it to lenders offering working capital finance, subject to status and lender criteria. You can check your funding options with a soft search that does not affect your credit score, and see the providers listed under tax funding. Borrowing to pay tax costs interest and fees, so compare it with a payment plan from HMRC first.