Payment on Account Calculator

What payments on account are

Payments on account are two advance instalments toward your CURRENT tax year's Self Assessment bill, paid alongside the balancing payment for the year that's just ended. Each one is half of last year's total Self Assessment liability — HMRC's way of collecting tax closer to when it's earned, rather than waiting a full extra year for it all in one go.

The two triggers that mean you don't owe them

You don't need to make payments on account if last year's Self Assessment bill was under £1,000, or if 80% or more of your total tax for the year was already collected some other way — through a PAYE tax code, or bank-deducted savings interest, for example. Meet either test and your only payment is the balancing payment itself.

The £1,000 and 80% rules together

Both tests are checked against your total tax liability for the year, not your Self Assessment bill in isolation — if £800 of a £4,000 total was collected via your tax code, that's only 20% at source, well under the 80% threshold, so payments on account still apply to the £3,200 collected through Self Assessment.

The 31 January and 31 July schedule

Each payment on account is due in two instalments: 31 January (alongside the balancing payment for the previous year) and 31 July. Both instalments are the same amount — half of last year's Self Assessment bill each. The balancing payment for the current year, once your actual bill is known, falls the following 31 January, netted against whatever you've already paid on account.

Reducing your payments on account

If you expect this year's bill to be lower than last year's — a quieter trading year, for example — you can ask HMRC to reduce your payments on account to a more accurate figure. Reduce them too far, though, and if your actual bill turns out higher, HMRC charges interest on the shortfall back to the original due date, so reduce based on a genuine forecast, not a guess.

Why this catches new self-employed people out

Payments on account bite hardest in your second year of self-employment: you're paying the balancing payment for year one AND the first payment on account for year two on the same 31 January — one-and-a-half years of tax due at once. Setting aside a steady proportion of income each month from the start avoids the shock.

A worked example

A sole trader owes £4,800 for the 2025/26 tax year through Self Assessment, none of it deducted at source. Because the bill is over £1,000 and nothing was collected another way, payments on account apply: £2,400 due 31 January 2027, another £2,400 due 31 July 2027, each half of the £4,800 bill — before the 2026/27 balancing payment, due 31 January 2028, reconciles the two instalments against the real 2026/27 bill.

Common mistakes to avoid

The most common mistake is only budgeting for the balancing payment and being caught out by the first payment on account due the same day. Another is reducing payments on account too aggressively based on optimism rather than an actual forecast, then facing interest on the shortfall. A third is forgetting that Capital Gains Tax and student loan repayments don't count toward the £1,000 trigger or the payment on account amount — only your core Income Tax and Class 4 NI liability does.

Planning ahead

Because payments on account are set from last year's bill, a growing business's tax payments always lag a year behind its actual profit — useful to know when cash flow is tight after a strong year. ac-co's Self Assessment service tracks your running bill throughout the year and files your return, so your payments on account are based on the same numbers HMRC will eventually see.