Payments on Account: How They’re Calculated, Who Pays, and the Due Dates

Payments on account are advance payments towards your next Self Assessment tax bill (including Class 4 National Insurance if you’re self-employed). HMRC usually asks you to pay them in two instalments each year, based on what you owed last year.

Key takeaways

• Payments on account are advance payments towards your next tax bill (including Class 4 National Insurance if you’re self-employed).
• HMRC usually calculates each payment as half of last year’s tax bill.
• The two due dates are 31 January and 31 July (by midnight).
• You usually do not pay payments on account if last year’s tax bill was under £1,000.
• You usually do not pay payments on account if more than 80% of the tax you owed was paid outside Self Assessment.

What are “payments on account”?

Payments on account are payments made towards your next tax bill.

They are part of Self Assessment and are common for:

• self-employed people (sole traders)
• partners in partnerships who complete Self Assessment

How does HMRC usually calculate them?

HMRC usually sets two payments, and each one is half of the tax you owed last year.

You can think of it like this:

What HMRC looks at	What you pay	When you pay it
Last year’s tax owed	50%	By midnight on 31 January
Last year’s tax owed	50%	By midnight on 31 July

When are payments on account due?

They’re due by midnight on:

• 31 January
• 31 July

When might you not have to pay payments on account?

You do not have to make payments on account if either of the following applies:

• the amount of tax you owed last year was less than £1,000, or
• last year you paid more than 80% of the tax you owed outside Self Assessment

What happens if last year’s estimate doesn’t match what you actually owe?

Payments on account are based on estimated earnings (usually last year’s figures). If you end up owing more than your payments on account cover, you may need to make an extra amount to settle the difference (often referred to as a balancing payment).

Common mistakes to avoid

• Assuming everyone pays payments on account: the £1,000 and “80% paid outside Self Assessment” tests can mean you do not need to.
• Missing the 31 July payment: it’s easy to focus on January and forget there’s a second instalment.
• Not planning for what you owe on top: if your tax bill increases, payments on account may not cover everything.

Summary

Payments on account are advance payments towards your next Self Assessment bill, usually calculated as two instalments worth half of last year’s tax each. They’re due by midnight on 31 January and 31 July, and you may not need to pay them if last year’s tax was under £1,000 or if more than 80% was paid outside Self Assessment.