# HMRC Payments on Account: Complete Self Assessment Guide An essential guide to HMRC payments on account for Self Assessment. Learn how they are calculated, who must pay them, and how to reduce them safely using form SA303. **Published:** 2026-07-03 **Updated:** 2026-07-03 **Source:** https://aztajournal.com/gb/hmrc-payments-on-account --- > Payments on account are advance contributions towards your next UK Self Assessment tax bill, payable in two instalments. This guide explains which taxpayers must pay them, how the calculations work, and how you can safely reduce your payments using HMRC form SA303. HMRC payments on account are advance tax instalments designed to spread your upcoming Self Assessment liability into two annual payments. You can reduce these payments online or using **form SA303** if you know your earnings for the tax year will decrease. However, you must calculate this carefully to avoid HMRC interest charges on any unpaid tax. ## Key takeaways: HMRC payments on account - Payments on account are advance tax payments split into two instalments due each year on 31 January and 31 July. - They trigger automatically if your previous year's Self Assessment bill exceeds £1,000, unless 80% of your tax is paid at source. - You can reduce your payments on account if you expect your earnings to decrease, but underestimating will result in interest charges. ## What are payments on account? Under **section 59A of the Taxes Management Act 1970**, payments on account are mandatory advance payments towards a taxpayer's projected annual income tax and National Insurance liability. HMRC collects these payments in two equal instalments throughout the year to prevent sole traders, landlords, and directors from accruing large tax debts. HMRC collects payments on account to align self-employed tax collections with PAYE systems, where employees pay income tax monthly as they earn. Because business owners and landlords do not face automatic payroll deductions, they would otherwise hold tax revenue for up to nine months. Section 59A ensures tax flows to the exchequer evenly across the financial year. ## Why is my January Self Assessment bill so high? Your January Self Assessment bill is exceptionally high due to a first-year tax shock that requires paying three distinct liabilities at once. During your first year requiring payments on account, you do not just pay the preceding year's tax. You must also pay half of the estimated bill for the following year in advance. 1. The tax bill for the tax year just ended, which is submitted via your current Self Assessment return. 2. The first payment on account, which represents exactly 50% of your projected tax bill for the upcoming year. 3. Any balancing payment due if your previous advance payments did not cover your actual tax liability. ## When do you have to do payments on account? You must make payments on account if your Self Assessment tax bill exceeds £1,000, unless you pay most tax at source. HMRC assesses your previous tax return to see if you meet the statutory criteria for advance payments. If you fall below the specific thresholds, you will only pay a single balancing amount each January. - Your total Self Assessment liability, including income tax and Class 4 National Insurance, is more than £1,000. - Less than 80% of your total tax bill is collected at source, such as via pay-as-you-earn payroll deductions. - The calculation excludes separate liabilities like Capital Gains Tax, student loan repayments, and Class 2 National Insurance contributions. ## How are payments on account calculated? HMRC calculates each of your two payments on account as exactly 50% of your previous year's total Self Assessment tax bill. This math splits your liability equally across two payment windows to help pace your cash flow. For example, if your total tax and Class 4 National Insurance liability for the 2024/25 tax year is £4,000, your payments on account for 2025/26 are split. You will pay £2,000 in January and another £2,000 in July. This remains your set billing rate unless you submit a formal request to alter the payment amount. ## What are the deadlines for payments on account? Your payments on account must reach HMRC by 31 January and 31 July each year to avoid automatic late payment interest. The payments are strictly tied to the fiscal calendar. Missing these dates can damage your tax compliance record and lead to rising financial penalties. | Payment Type | Due Date | Tax Year Breakdown | | --- | --- | --- | | First payment on account | 31 January | 50% of your estimated tax bill for the current year | | Second payment on account | 31 July | Remaining 50% of your estimated tax bill for the current year | | Balancing payment | 31 January (following year) | Any remaining unpaid tax from the previous year | ## Can I reduce my payments on account? You can reduce your payments on account by submitting form SA303 online if you expect your profits to decrease. This reduction is standard if you lose a major client, stop trading, or start a PAYE job. However, if your actual income turns out higher than your new estimate, HMRC will charge interest on the difference. You should calculate your expected profits carefully before requesting any reduction to avoid these interest charges. ## What happens if I overpay my tax? If you overpay your payments on account, HMRC will automatically refund the excess credit or offset it against your next bill. The refund is calculated once you file your next Self Assessment return and show your actual liability was lower. You can request the repayment directly to your bank account via your online tax portal. Alternatively, you can choose to leave the credit on account to satisfy future Self Assessment liabilities. ### Do payments on account include Class 2 National Insurance contributions? No, Class 2 National Insurance contributions are excluded from payments on account calculations and are paid fully within your January balancing payment. ### Can I use form SA303 online to lower my payment on account? Yes, you can submit form SA303 digitally through your HMRC online tax account to request a reduction in your payments. ### What interest rate does HMRC charge for underpaid tax payments on account? HMRC charges late payment interest at the current official rate, calculated daily from the original due date on any underpaid difference. ### Are payments on account required if my tax bill is under £1,000? No, you do not have to make payments on account if your Self Assessment tax liability is less than £1,000. ### How do I claim a refund if I overpaid my payments on account? You can request a repayment through your HMRC online portal or ask HMRC to deduct the credit from your next tax bill.