Payments on Account

Definition

Payments on Account are advance payments towards your tax bill for the next tax year, based on your previous year's liability. If your last Self Assessment tax bill was over £1,000, you generally need to make two payments on account: one by 31 January and one by 31 July, each equal to half of the previous year's liability. If your income has dropped, you can apply to reduce your payments on account.

Why it matters

• New self-employed people are often caught out — their first tax bill can feel larger because it includes the balancing payment plus the first payment on account.
• If your income drops significantly, you can reduce your payments on account to avoid overpaying.

Common use cases

• Self Assessment cash flow planning
• First year Self Assessment filing
• Applying to reduce payments on account