If you’re self-employed or have other untaxed income, your first big Self Assessment bill can be much bigger than you expect. The usual reason is payments on account: advance payments towards next year’s tax, collected alongside this year’s.
What are payments on account?
They’re two instalments towards your next tax bill, each 50% of your previous year’s Income Tax and Class 4 National Insurance. They’re due:
- 31 January, during the tax year, and
- 31 July, just after the tax year ends.
Then on the following 31 January you pay a balancing payment (any tax still owed) and the first payment on account for the next year.
Who has to make them?
You make payments on account unless either:
- your last Self Assessment bill was £1,000 or less, or
- more than 80% of your total tax was already collected at source, for example through PAYE.
Student loan repayments and Capital Gains Tax are not included in payments on account. They’re paid with the balancing payment.
The first-year double payment
In your first year of self-employment you won’t have made any payments on account, so the first January can be a shock. Take a sole trader whose first full tax year is 2026/27, with £30,000 of profit:
| Due | Payment | Amount |
|---|---|---|
| 31 January 2028 | Balancing payment for 2026/27 | £4,531.80 |
| 31 January 2028 | 1st payment on account for 2027/28 | £2,265.90 |
| 31 July 2028 | 2nd payment on account for 2027/28 | £2,265.90 |
That’s about £6,798 in one January, roughly 18 months of tax. From then on it settles into a steady pattern.
How to budget for it
Set aside a fixed share of every payment you receive. Our self-employed tax calculator gives you a monthly set-aside figure: your annual bill divided by 12. A separate savings account for tax, ideally an easy-access one paying interest, stops you spending it by accident.
Reducing your payments on account
If your income is falling, for example because you’re winding down or had a bad year, you can ask HMRC to reduce your payments on account through your online account or form SA303. Be realistic. If you reduce them too far and your bill turns out higher, you’ll pay interest on the shortfall from the original due dates.
What if your income goes up?
Payments on account are based on last year, so if your profit grows, your balancing payment will be bigger. The calculator shows this. A rising business should set aside more than the payments on account alone.
Interest and penalties
Late payments attract interest from the day after the due date. If the balancing payment is more than 30 days late, a 5% late payment penalty applies, with further penalties at 6 and 12 months. HMRC offers Time to Pay arrangements if you can’t pay in full. Contact them before the deadline.
Making Tax Digital
From April 2026, sole traders and landlords with qualifying income over £50,000 must keep digital records and send quarterly updates. The quarterly updates don’t change when you pay. Payments on account and balancing payments keep the same dates. See our Making Tax Digital guide.
Common questions
Are payments on account an extra tax?
No. They’re advance payments towards next year’s bill, credited when you file the next return.
What if my payments on account were too high?
You get the excess back as a refund, or it’s credited against your next bill, after you file your return.
Do student loans count in payments on account?
No. Student loan repayments are paid with the balancing payment. See student loan plans compared.
How much should I save each month?
Your annual bill divided by 12, more if profits are rising. The self-employed tax calculator gives a set-aside figure and timeline.
This guide is general information, not financial or tax advice.