Payments on account (2026/27)

HMRC's advance-tax mechanism explained, with the January and July payment cycle.

Payments on account are HMRC's way of having you pre-pay next year's tax in two equal instalments rather than in one lump. Most people who file Self Assessment for the first time and then exceed £1,000 of liability hit them as a nasty surprise: the first January after a profitable year you owe 150% of your tax bill, not 100%.

Quick reference: a fuller, worked-example version of this guide is in development. The figures below are accurate for 2026/27 as of the last build.

Key facts

Triggered when	Your Self Assessment liability exceeds £1,000 AND less than 80% of your tax was deducted at source (PAYE).
How much each	Half of last year's income tax + Class 4 NI bill.
Due dates	31 January and 31 July each year.
How to reduce	Form SA303 (or via your online HMRC account) if you genuinely expect lower profits. Reduce too far and HMRC charges interest on the shortfall.

Worked example - the January cliff

You earn £40,000 of self-employed profit in 2025/26. Your bill at 31 January 2027:

Balancing payment for 2025/26: full year's income tax + Class 4 NI ≈ £7,131.
First payment on account for 2026/27: half the 2025/26 bill ≈ £3,566.
Total due 31 January 2027: ≈ £10,697.

Then on 31 July 2027 you pay the second £3,566 instalment for 2026/27. The following January you settle 2026/27 itself, plus the first instalment for 2027/28 - and the cycle repeats.

Reducing payments on account

If you know your profits will drop (a quiet year, parental leave, illness, a switch to PAYE), you can ask HMRC to reduce the on-account amount. File form SA303 or use the "Reduce my payments on account" option in your HMRC online account.

The catch: if you reduce the payments and your actual liability ends up higher, HMRC charges interest from the original due date on the underpayment. So be conservative - better to pay slightly more on account and get a small refund than to under-pay and pay interest.

When payments on account don't apply

Your last Self Assessment bill was under £1,000.
More than 80% of your tax was deducted at source - for example, you have a salaried job alongside a small side gig and PAYE handled most of it.
Class 2 NI is no longer included in the calculation since 2024/25, so on-account payments cover income tax and Class 4 only.

Sources

Related guides

Class 2 and Class 4 National Insurance - full rates, thresholds and payment dates.
Sole trader vs limited company - which structure pays less UK tax, with worked examples at £30k, £50k and £80k profit.
Reduce your tax bill legally - the HMRC-approved levers, ordered by how much they actually move the bill.
Allowable expenses - The HMRC-accepted categories you can deduct from profit, plus the simplified-expenses shortcut.
Self Assessment deadlines - Every Self Assessment deadline that lands during the 2026/27 tax year, and the penalties for missing each.

Or run the numbers for your own profit level: £50,000 self-employed, £75,000 self-employed, or browse all bracket pages.