Payments on Account Explained: Why Your January Tax Bill Can Jump
Payments on account are advance payments towards a future Self Assessment bill. HMRC normally asks for two instalments, each usually half of the previous year's relevant tax bill. They can make a first large January payment feel surprising because a balancing payment and a new advance payment can fall due together.
Who usually has to make payments on account?
You usually do not have to make them if the prior year's tax bill was below £1,000, or if more than 80% of that tax was collected outside Self Assessment. HMRC shows the amount on your statement or online account; do not estimate it from turnover alone.
What are the payment dates?
- 31 January: balancing payment for the prior year, plus the first payment on account where required.
- 31 July: second payment on account.
- The following 31 January: any balancing payment if the two advances did not cover the final bill.
Can you reduce a payment on account?
If you genuinely expect lower income or tax, HMRC allows a reduction request. It is sensible to keep workings that support the estimate. Reducing the instalments too far can lead to interest on the shortfall, so this is not a way to defer a bill you still expect to owe.
Practical next steps
- Open your latest Self Assessment statement instead of relying on a previous estimate.
- Put both 31 January and 31 July in your cash-flow calendar.
- Compare expected profit with the previous year before considering a reduction.
- Keep evidence for any reduced-payment estimate in case your income changes.
