You open your self-assessment statement, ready to settle your 2025/26 tax bill. Then you spot a second charge for “First payment on account for 2026/27”. Why is HMRC asking for money for two tax years at once? One amount settles any tax you still owe for 2025/26. The other goes towards your 2026/27 bill. Once you can tell the two apart, it’s easier to see what you need to set aside for January and July.
Quick answer. Payments on account are advance instalments towards your Self Assessment tax bill. If HMRC requires them, you’ll usually pay twice a year, by 31 January and 31 July. Each instalment is normally half the relevant amount from your previous year’s tax calculation. If those payments leave tax outstanding, you pay the difference as a balancing payment.
The examples below show how to read your January bill and work out what’s left to pay. For help organising records, understanding allowable expenses and preparing your return, see Skill Up’s UK Self Assessment Tax Return Diploma.
What Are Payments on Account?
Whether you searched for “payments on account meaning”, “meaning of payment on account” or “define payment on account”, start with the tax year printed beside the charge. A payment on account is credited towards the bill for that year. For example, your first payment on account for 2026/27 is due on 31 January 2027, while the 2026/27 tax year is still running. Your second instalment for the same year is due on 31 July 2027.
A balancing payment settles any tax left over once HMRC takes account of what you’ve already paid. So a January statement can show a balance for the year you’ve just filed and an advance instalment for the next year. Check the tax year beside each line when reading your Self Assessment statement.
UK Self Assessment Tax Return Diploma
Who Has to Make Payments on Account?
Payments on account can apply to sole traders, landlords and people who earn money alongside a PAYE job. Filing a Self Assessment return alone does not trigger them. HMRC’s calculation notes say you generally do not have to make payments on account if either of these conditions applies.
- The relevant amount from your previous year’s tax calculation was less than £1,000.
- More than 80% of the previous year’s tax was covered by tax taken off at source, such as through PAYE.
An amount of exactly £1,000 can trigger payments on account if the other exception does not apply. If you have a job and earn extra income on the side, the 80% check looks at tax already collected, rather than how much of your income came from your job.
How Does HMRC Calculate Payments on Account?
Start with the tax calculation for the previous year. HMRC adds up the Income Tax and any Class 4 National Insurance that count towards payments on account, takes off tax already collected at source, such as through PAYE, and divides the result by two. Each half is one instalment.
Worked example. Say your previous year’s calculation shows £2,700 in Income Tax after PAYE and £500 in Class 4 National Insurance. That gives HMRC £3,200 to work with. If payments on account are due, you’ll normally pay £1,600 in January and £1,600 in July.
If the same calculation includes a £600 student loan repayment, that amount stays in your balancing payment. The same rule applies to Capital Gains Tax. That’s why each instalment can differ from half the total on your tax return.
For a wider look at how your bill is worked out, see our guide to self-employed tax in the UK.
When Are Payments on Account Due?
| Deadline | What You Pay |
|---|---|
| 31 January 2027 | Any remaining 2025/26 tax plus your first payment on account for 2026/27, if due. |
| 31 July 2027 | Your second payment on account for 2026/27, if due. |
| 31 January 2028 | Any remaining 2026/27 tax plus your first payment on account for 2027/28, if due. |
Both 2027 instalment deadlines fall on a weekend. HMRC says the payment should reach it by the previous working day unless you use Faster Payments or pay by debit or credit card. Check the timing for your chosen method before you send the money.
Have your payment reference ready too. For Self Assessment, it is usually your 10-digit Unique Taxpayer Reference (UTR) followed by the letter K. If you need to find or request your reference, see our guide on how to get a UTR number.
Payments on Account Examples
Example 1. Your First January Bill Is £4,800
Suppose your 2025/26 bill is £3,200, all of it counts towards the calculation, and you’ve made no advance payments for that year. HMRC works out two payments on account of £1,600 each for 2026/27
| Charge Due on 31 January 2027 | Amount |
|---|---|
| Remaining tax for 2025/26 | £3,200 |
| First payment on account for 2026/27 | £1,600 |
| Total Due in January | £4,800 |
The second £1,600 is due on 31 July 2027. Once you’ve paid it, you’ll have paid £3,200 towards your 2026/27 bill.
Example 2. Your Final Bill Comes to £3,600
When you file your 2026/27 return, suppose the actual bill comes to £3,600. You’ve already paid £3,200 on account, leaving a £400 balancing payment. If the full £3,600 also counts towards the next year’s calculation, your first 2027/28 instalment is £1,800. That makes £2,200 due on 31 January 2028.
If you expect your tax bill to fall, you can ask HMRC to reduce your payments on account. The amount you ask to pay should reflect a reasonable estimate of what you’ll owe.
Can You Reduce Your Payments on Account?
Yes. If you expect to owe less tax this year, you can ask HMRC to reduce your payments on account. This can make sense if your profits have fallen, you’ve stopped letting a property or more of your tax will be collected through PAYE. Base your claim on a reasonable estimate of the tax you’ll owe for the year. You can apply through your Self Assessment online account or by post. HMRC’s guide to reducing payments on account.
Example 3. You Reduce Your Installments to £900 Each
In the earlier example, HMRC set your payments on account at £1,600 each. You now expect your 2026/27 bill to fall to £1,800, so you claim to reduce each instalment to £900.
| What You Work Out | Amount |
|---|---|
| Revised estimate for 2026/27 | £1,800 |
| Two reduced instalments of £900 | £1,800 |
| Actual 2026/27 bill | £2,000 |
| Tax Still to Pay | £200 |
What If You Miss a Payment or Can’t Afford It?
HMRC can charge interest on a late payment on account from its original due date. Missing the instalment date does not itself trigger a late-payment penalty on that instalment. If tax is still unpaid after the balancing payment falls due, a penalty can apply under the rules for that bill. The Self Assessment late-payment interest rate rises from 7.75% to 8.00% on 24 November 2026.
If the bill is already overdue, check whether you can set up a Time to Pay arrangement. If you’re planning for an upcoming bill, a Budget Payment Plan may let you put money towards it weekly or monthly.
Will Payments on Account Change From April 2029?
Yes. From April 2029, the government plans to replace the two large payments on account with smaller, more frequent instalments. The aim is to bring tax payments closer to when you earn the income, which could make them easier to budget for. The government has yet to confirm exactly how often payments will be due.
The year to watch is 2029/30. During the transition, you’ll need to settle any remaining tax for the previous year while starting payments under the new schedule. Your annual self-assessment filing deadline will still be 31 January.
For now, use the amount and due date on your Self Assessment statement to plan your next instalment.
What to Check Before Your Next Payment
Before you pay, open your Self Assessment statement and check the tax year, the amount and the due date beside each charge. If your January bill includes both a balancing payment and a payment on account, jot them down separately. That way, you can see how much settles last year’s bill and how much goes towards the next one. If a July instalment is due, add it to your calendar while you have the statement open.
If your profits have fallen or more of your tax is now collected through PAYE, update your estimate before asking HMRC to reduce your payments on account. For a wider look at what you might owe, see our guide to self-employed tax in the UK.
If you’d like to feel more confident before your next return, Skill Up’s UK Self Assessment Tax Return Diploma covers organising records, working through allowable expenses and preparing your return.
Frequently Asked Questions
They’re advance instalments credited to the tax year shown on your statement. If you searched for “payments on account meaning”, “meaning of payment on account” or “define payment on account”, check the year next to the charge. For example, the first instalment for 2026/27 is due on 31 January 2027, alongside any outstanding 2025/26 balance.
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