Payments on account are advance tax payments for the Self Assessment system, due in January and July. They help spread the tax burden over the year, with the amount based on the previous year’s tax. Find out how payments are calculated and how to manage them for the 2026 tax year.
Introduction
Payments on account are advance payments towards income tax made by individuals who file under the Self Assessment system in the UK. These payments help spread the tax burden across two instalments during the year. Payments are based on the previous year’s tax liability and are applicable mainly to the self-employed and those without tax automatically deducted from their income.
Payments on account are advance payments towards income tax based on the previous year’s tax.
These payments divide the total tax liability into two instalments.
Who Needs to Pay and When?
Payments are due on 31 January and 31 July each year.
Applies to individuals with a tax liability exceeding £1,000.
How to Reduce Your Payments on Account
If you expect a reduction in income for the upcoming year, you can request a reduction in your payments on account. However, if your estimate turns out to be too low, you will be required to pay interest on the shortfall.
Practical Impacts for the 2025/26 – 2026/27 Tax Year
For individuals submitting their tax returns in 2025 for the 2024/25 tax year:
The first payment on account will be due by 31 January 2026.
The second instalment will be due by 31 July 2026.
If the actual tax liability exceeds the payments on account, a balancing payment will need to be paid by 31 January 2027.
Reducing Your Payments on Account
If you anticipate lower income, consider applying for a reduction in your payments on account to avoid overpaying. However, remember that an inaccurate estimate could result in interest charges for any underpaid amount.
Key Information
When to pay? |
31 January and 31 July |
How Much? |
50% of the previous year’s tax liability |
Who Pays? |
Individuals with a tax liability exceeding £1,000 |
Further Payment? |
Balancing payment due the following 31 January |
Option to Reduce |
Yes, you can request a reduction in payments on account |
Tips for Managing Payments on Account
If you expect lower income, request a reduction in your payments on account.
Stay on top of deadlines to ensure you don’t miss any payments, as missing a deadline may incur penalties.
Conclusion
Payments on account help spread the tax burden over the year, but they can pose challenges for self-employed individuals or those under Self Assessment. Timely requests for reduction in payments can help with cash flow management, ensuring that you do not face unexpected tax liabilities.
For practical strategies and resources on self-education for entrepreneurs, check out our article on self-education for entrepreneurs.