Payments on account explained: why your January bill is bigger than the tax you owe
Payments on account are the part of Self Assessment that catches people out. They are advance payments towards next year's tax, so in the first year they start, January asks for more than the year's bill.
Who makes them
HMRC asks for both payments unless your last Self Assessment bill was under £1,000, or you paid more than 80% of that tax outside Self Assessment, for example through PAYE. Each payment is half of last year's bill, due on 31 January and 31 July. Student loan repayments aren't included in them.
A worked example
Take £40,000 of profit, self-employed only, England, Wales or Northern Ireland. Tax and Class 4 National Insurance for the year come to £7,131.80. If that's the first year your bill passes £1,000:
| Date | Payment | What it covers |
|---|---|---|
| 31 January | £7,131.80 | The balance of the year just ended |
| 31 January | £3,565.90 | First payment on account for the next year |
| 31 January total | £10,697.70 | |
| 31 July | £3,565.90 | Second payment on account |
The year after, if your profit is unchanged, the two payments on account already cover that year's bill and there is nothing extra to find. If your real bill is higher, you pay the difference by the next 31 January; if it's lower, you can claim the overpayment back.
If your profit has dropped
You can ask HMRC to reduce your payments on account, online from your latest return in your tax account, or on form SA303 by post. Be careful: if the final bill turns out higher than the reduced payments, HMRC charges interest on the gap.
How to be ready
The year your bill first passes £1,000, set aside about one and a half times the usual share of profit. The calculator lists each date and amount, including the first payment on account, and the tax set-aside note has more examples, with a job alongside too. Deadline dates are on the 31 January 2027 page.
This is a planning guide, not tax advice. The rules are on GOV.UK, checked 21 October 2026.