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Guide · Tax and MTD

Payments on account: why your January tax bill is bigger than you expected

Why HMRC asks for next year's tax in advance once your bill passes a limit, and how to plan for the year it starts.

Stephen Evans, editor
Figures checked against GOV.UK and HMRC guidance
Last checked 28 Oct 2026 · Next review Apr 2027

The short answer

Tax year 2026/27

Payments on account are two advance payments towards next year's tax, each half of your last bill, due on 31 January and 31 July. You make them if your last self-assessment bill was over £1,000, unless more than 80% of your tax was already collected at source, through PAYE or CIS deductions. In the first year they apply, January brings last year's whole bill plus half of it again. You can ask HMRC to reduce them if you expect to earn less.

What are payments on account?

They're HMRC's way of collecting tax closer to when you earn it. Each payment is half of last year's bill for income tax and Class 4 National Insurance, and it goes towards the current tax year:

  • 31 January: the first payment on account, alongside the balance of last year's bill.
  • 31 July: the second payment on account.
  • The next 31 January: a balancing payment if the year's real bill is bigger than the two payments, or a refund or credit if it's smaller.

Who has to make them?

You make payments on account if your last self-assessment bill was more than £1,000. You don't if more than 80% of the tax you owed was already taken before the return, for example through a tax code on a job or CIS deductions from contractors.

So a sole trader with no job and no CIS deductions makes them as soon as the bill passes £1,000. A subcontractor whose CIS deductions cover most of the bill usually doesn't.

Why is the first January bill so big?

In your first year over the limit, January brings two things at once: the whole bill for last year, because nothing was paid towards it in advance, and the first payment on account for this year.

Example. Your bill for 2025/26 is £4,000 and it's your first over £1,000.

  • 31 January 2027: £4,000 for 2025/26, plus a £2,000 first payment on account for 2026/27. Total £6,000.
  • 31 July 2027: the second £2,000 payment on account for 2026/27.
  • 31 January 2028: your 2026/27 bill turns out to be £5,000. You've paid £4,000 towards it, so the balancing payment is £1,000. The first payment on account for 2027/28, £2,500, is due the same day. Total £3,500.

That first £6,000 January is the one that catches people out. From then on the payments track your bill, as long as your profit stays roughly level.

Our tax set-aside calculator works out whether payments on account apply to you and lists every payment and date for 2026/27.

Can I reduce my payments on account?

Yes, if you expect this year's bill to be lower, say because you've had months without work or you've started claiming bigger expenses. You can apply to reduce them online in your HMRC account or by post.

Be realistic. If you reduce them and the real bill turns out higher, HMRC charges interest on the shortfall from the original dates, currently 7.75% a year.

How to plan for them

  • Put tax aside every month rather than waiting for January. As a rough guide, keep back the monthly figure from our self-employed tax rates table for your profit.
  • If you know your first bill is coming, budget for one and a half times it in January.
  • Use free tax reminders so 31 July doesn't sneak up on you.
  • The deadlines and penalties for the January return are in self-assessment deadline.

Common questions

Do payments on account include student loan repayments?

No. They cover income tax and Class 4 National Insurance only. Student loan repayments are paid in full with the balancing payment each January.

I'm a CIS subcontractor. Do I make payments on account?

Often not. CIS deductions count as tax collected at source, so if they cover most of your bill, or you get a refund, there's nothing to pay in advance. If your deductions fall well short of your bill, you will.

What if I can't pay the July payment?

Contact HMRC before the date. You can set up a payment plan online for self-assessment debts. Interest runs on anything paid late.

Do payments on account stop when I stop trading?

Once you stop and your final return shows a bill under £1,000, or nothing, no more are asked for. If you know your income has dropped, you can apply to reduce the payments before then.

Related toolSee your own tax dates and payments on account

Sources

  1. Understand your Self Assessment tax bill: payments on account, GOV.UK. Checked 28 Oct 2026
  2. Self Assessment tax returns: deadlines, GOV.UK. Checked 28 Oct 2026
  3. HMRC interest rates for late and early payments, GOV.UK. Checked 28 Oct 2026

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