What are payments on account for Self Assessment?

Do I have to make payments on account?

Yes, if last year’s Self Assessment bill was £1,000 or more, unless last year you paid more than 80% of the tax you owed outside of Self Assessment (for example through your tax code or because your bank had already deducted interest on your savings).

They are not an extra tax, just part of next year’s bill paid early. HMRC works them out for you, and your Self Assessment statement or online account shows how much each one is.

Both tests look at last year’s figures, so the answer can change from one year to the next. A year with a bill under £1,000 means no payments on account the year after, and a bigger year brings them back.

How much are payments on account, and when are they due?

Each one is half of last year’s bill, due by midnight on 31 January and 31 July. GOV.UK’s definition takes in National Insurance too: ‘Payments on account’ are payments towards your next tax bill (including Class 4 National Insurance if you’re self-employed). Capital gains tax and student loan repayments are taken out before the halves are worked out, so you pay those in one go in January.

If this year’s tax comes to more than the two payments, you pay the rest by 31 January the following year. That is the balancing payment. If it comes to less, you may be able to claim a refund. So a normal year looks like this:

• 31 January: the balancing payment for last year, plus the first payment on account for this year.
• 31 July: the second payment on account for this year.

To see yours, sign in to your HMRC online account, open your latest Self Assessment return and choose “View statements”. It shows the payments on account you have made and the ones still to come.

Why is my first Self Assessment bill so high?

If your first year’s bill is £1,000 or more, the January it is due has two parts: all of that year’s tax, and the first payment on account towards your second year. Nothing was paid in advance, so it all lands at once. An example with round numbers, where the first year’s tax is £4,000 and the second year’s is £5,000:

1. First 31 January: £6,000. That is £4,000 for the first year, plus £2,000 on account towards the second.
2. First 31 July: £2,000. The second payment on account.
3. Next 31 January: £3,500. A balancing payment of £1,000 (£5,000 less the £4,000 already paid), plus £2,500 on account towards the third year.

In that first January you pay one and a half years’ tax. GOV.UK’s own example works the same way: a first bill of £3,000 means £4,500 by 31 January. After that, the payments follow your profit. If it rises, the balancing payment and the next payments on account rise with it. If it falls, the balancing figure can turn into a refund.

For a rough figure for this year, landlords can use our rental tax calculator and CIS subcontractors our CIS refund calculator.

How do payments on account work for CIS subcontractors?

The same way, with one extra step for the tax your contractors take off. These deductions count as advance payments towards your tax and National Insurance bill. You claim them back against your bill on your Self Assessment return. Your payments on account are then worked out on what was left to pay once the CIS was taken off. If the CIS covered your whole bill, or you got a refund, there are none to make.

CIS also counts if you claim to reduce them. HMRC’s manual says: The level of deductions made against payments received by the subcontractor for one year can be taken into account in a claim to reduce the level of payments on account for the next year. Any cut is shared equally between the two payments, even when the reason is CIS. With gross payment status nothing is taken off, so you pay all of your tax yourself.

Either way, keep every statement your contractors give you. When tax is taken off, they must give you a payment and deduction statement each month, and HMRC can ask to see them when you claim the deductions. With gross payment status they do not have to give you one, so your own record of what each contractor paid you is the evidence.

Can I reduce my payments on account?

Yes, if you expect this year’s tax to be lower than last year’s. You tell HMRC how much you expect to make, and it works out the new payments from that. There are two ways:

1. Online: sign in to your HMRC online account, view your latest Self Assessment return and choose “Reduce payments on account”.
2. By post: send form SA303 to your tax office.

HMRC splits the new figure into two equal payments, and the due dates stay the same. Reducing them too far costs money. If you reduce your payments on account and your tax bill is higher than expected, you’ll be charged interest on the difference. That interest runs from the original due dates, not from when you find out.

Other questions about payments on account