Payments on Account Explained
Last reviewed: April 2026
If your Self Assessment tax bill exceeds £1,000, HMRC requires advance payments toward next year's liability. Many new freelancers are caught off guard by a January bill that is up to 150% of one year's tax. Here is exactly how it works.
At a glance
- ✓Payments on account apply when your SA bill exceeds £1,000
- ✓Each payment is 50% of the previous year's liability — due 31 January and 31 July
- ✓The first January bill combines a balancing payment AND the first instalment
- ✓You can apply to reduce payments if your income drops — but interest runs if you underpay
Key dates
| Date | What is due |
|---|---|
| 31 January | Balancing payment for previous tax year + first payment on account for current year |
| 31 July | Second payment on account for current tax year |
| 5 October | Deadline to register for Self Assessment if new to it |
| 31 January (online) | SA return filing deadline for current year |
Worked example — first year freelancer
Scenario: Went self-employed in 2025/26. SA bill for that year: £5,000.
- 31 January 2027: Pay £5,000 (balancing payment for 2025/26) + £2,500 (1st payment on account for 2026/27) = £7,500 in one go
- 31 July 2027: Pay £2,500 (2nd payment on account for 2026/27)
- 31 January 2028: Balancing payment for 2026/27 (if actual bill differs from £5,000) + 1st payment on account for 2027/28
Tip: Start saving 25–30% of each invoice from day one. The January shock catches many new freelancers unprepared.
How to reduce payments on account
If your income this year is lower than last year, you can apply to reduce payments on account. Log into your Personal Tax Account and select "Reduce payments on account", or submit form SA303 by post.
Caution: If you reduce payments on account but your actual bill turns out to be higher, HMRC charges interest on the shortfall at 7.75% per year from the original due date. Only reduce if you are confident your income has genuinely fallen.
Common questions
Who has to make payments on account?
Anyone whose Self Assessment tax bill exceeds £1,000 in a tax year, and where less than 80% of that tax was collected at source (e.g. through PAYE), must make payments on account for the following year.
How are payments on account calculated?
Each payment on account is 50% of your previous year's Self Assessment liability (excluding capital gains tax). So if your 2025/26 bill was £6,000, each 2026/27 payment on account is £3,000.
Can I reduce my payments on account?
Yes. If you expect your income to be lower than last year, apply to reduce via your Personal Tax Account or by submitting form SA303. Beware: if you reduce too much, HMRC charges interest on the shortfall from the original due date.
What is a balancing payment?
After the tax year ends, HMRC calculates your actual liability. If it exceeds the two payments on account you already made, the difference is the balancing payment — due on 31 January the following year.
Sources
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