Many self-employed people breathe a sigh of relief once January’s tax bill is paid, only to find another one waiting six months later. If you make payments on account, your second instalment for the 2025/26 tax year is due by 31 July 2026. Here’s what it means, why it exists, and how to make sure it doesn’t catch you off guard.
What Payments on Account Actually Are
Payments on account are advance payments towards your next Self Assessment tax bill. If your tax bill (including Class 4 National Insurance, where applicable) was more than £1,000 last year, and less than 80% of your income is taxed at source through PAYE, HMRC will usually ask you to pay in two instalments rather than one lump sum. Each instalment is 50% of your previous year’s total tax bill — one due on 31 January, the other on 31 July.
Why the July Payment Catches People Out
The January deadline tends to get all the attention because it combines your balancing payment with your first instalment for the year ahead. By comparison, July’s payment can feel like it comes out of nowhere, especially if you’ve not set cash aside since the start of the year. There’s no tax return to file alongside it and no fresh calculation — it’s simply the second half of an amount based on last year’s figures, which means it’s easy to forget until the deadline is close.
What Happens If Your Income Has Changed
If your income for 2025/26 is lower than the year before, you don’t have to pay the full amount HMRC has estimated. You can apply to reduce your payments on account, either when filing your return or at any point before the balancing payment date, using form SA303. The catch is that if you reduce your payments by more than you should have, HMRC will charge interest on the shortfall from the date the original payment was due — so this is worth getting right rather than guessing.
What Happens If You Pay Late
HMRC doesn’t apply automatic late filing penalties to payments on account in the way it does to late tax returns, but interest still accrues on anything unpaid from 1 August. If you know you won’t be able to pay by 31 July, it’s far better to contact HMRC proactively and arrange a Time to Pay plan than to let the balance sit unpaid and the interest build.
Planning Ahead So It Doesn’t Repeat
The most effective fix for payment on account stress is simply building it into your routine. Setting aside a percentage of income as it comes in, rather than treating January and July as separate emergencies, takes the sting out of both deadlines. If your income fluctuates significantly year to year, this is also worth flagging to your accountant early, since an accurate forecast now can mean a smaller surprise later.
Getting the Right Support
Payments on account often look more complicated than they are, but getting the figures wrong — or missing the deadline — can mean unnecessary interest charges on top of a bill you were already expecting. As a chartered accountant Essex sole traders and landlords turn to for Self Assessment support, we help clients understand exactly what they owe and why, and where there’s a genuine case for reducing payments on account. Our financial advisor Essex team can also help you plan ahead so July and January stop being a source of dread. Find out more about us, or contact us if you’d like a hand with your next payment on account before the 31 July deadline.