HMRC wants tax on income you haven't earned yet — half of last year's bill, due on 31 July, whether or not this year is going the same way. If your income has dropped you can reduce it — but cut it too far and HMRC charges you interest for the privilege. Here's how to get it right.
If your last tax bill was £1,000 or more, HMRC asks for next year's tax in two instalments — 31 January and 31 July — before you even know what you've earned.
Each one is simply half of last year's bill. HMRC isn't predicting your income; it's assuming this year looks like last year.
On 31 January you settle the difference between the two payments and what you actually owed — up or down.
Two questions, and the honest answer either way.
The total income tax and Class 4 National Insurance for the year — not what you paid on the day. It's on your return as the amount due for 2024/25.
That means tax taken off before you were paid — usually through PAYE on a salary or a pension. If you're purely self-employed, the answer is almost always no.
Only worth answering if your income has changed. This is what decides whether you can safely reduce the 31 July 2026 payment — or whether reducing it would land you with interest.
An estimate, to help you plan — not tax advice. Capital gains and student loan repayments aren't included in payments on account, and a few situations work differently. If anything here is a surprise, talk to us before 31 July rather than after.
It's an advance payment towards your next Self Assessment bill. HMRC asks for it if your last bill was £1,000 or more and less than 80% of your tax was already collected at source (for example through PAYE). You make two: one on 31 January and one on 31 July, each equal to half of your previous year's income tax and Class 4 National Insurance.
Because it assumes this year will look like last year. Payments on account aren't a forecast of your actual income — they're just last year's bill, split in half. That's why they feel wrong when your income has changed, and why they can be reduced when it genuinely has.
If you genuinely expect to earn less, yes — you can claim to reduce both payments, and there's no sense handing HMRC money it will only have to refund. The danger is cutting it too far. If the real bill comes in higher than the reduced amount, HMRC charges interest on the shortfall, backdated to the original due date as though you had underpaid all along. Reduce it to what you honestly expect to owe, not to what you'd prefer to pay.
Interest starts running from the due date. Payments on account don't attract the automatic late-filing penalties that a late tax return does, but the interest is real and it compounds. If you can't pay, the answer is to talk to HMRC about a Time to Pay arrangement — not to ignore the date. That's a conversation we can have on your behalf.
No. Capital gains tax and student loan repayments are excluded from payments on account — they're settled in the balancing payment on 31 January instead. This catches people out: they pay both instalments in full and still face a large bill in January.
This is the single most common shock in Self Assessment. In your first year you pay the whole of last year's tax on 31 January and your first payment on account on the same day — so the bill can be 150% of what you expected. The second payment then follows on 31 July. Nothing has gone wrong; it's just the system catching up with you all at once.
Book a free, no-pressure call before 31 July. We'll tell you what you really owe — and whether that payment should be coming down.
Book a free call →We checked these rather than relying on memory. Every figure and deadline above comes from HMRC directly — go and read them yourself if you'd like to.
Last reviewed 13-07-2026. Tax rules change — if you're reading this long after that date, check the source.
