Payments on Account Calculator (2026/27)

Payments on account: the Self Assessment surprise nobody warns you about

For many people, the first brush with payments on account comes as a nasty shock. You file your first proper Self Assessment return, see a tax bill of, say, £3,000, and brace yourself to pay it - only to discover HMRC is asking for £4,500. The extra £1,500 isn't a mistake or a penalty; it's the first of two "payments on account" towards next year's bill. Understanding how they work, and budgeting for them, is one of the most important things a newly self-employed person or landlord can learn. This calculator tells you instantly whether they apply to you and how much each one will be.

What payments on account actually are

Payments on account are advance instalments towards your next year's Self Assessment tax bill. HMRC assumes that if you owed tax this year, you'll owe a similar amount next year, so it asks you to pay it in two chunks rather than all at once. Each payment is half of your previous year's tax bill. The first is due on 31 January (the same day as your balancing payment for the year just gone), and the second on 31 July. When you eventually file the next return, the payments you've already made are credited against the actual bill, and you either top up the difference or get a refund. HMRC explains the mechanics in its guidance on understanding your Self Assessment bill.

When do they apply?

You won't always have to make them. Payments on account are required unless one of two conditions is met:

• Your last Self Assessment bill was under £1,000, or
• 80% or more of your tax was already collected at source - for example through PAYE on a salary.

That second condition is why an employee with a small amount of side income often escapes payments on account: most of their tax is already deducted from their wages. A full-time sole trader, by contrast, has little or no tax collected at source, so they'll almost always be asked for payments on account once their bill tops £1,000. This calculator applies both tests for you - enter your bill and the tax collected at source, and it tells you straight away.

Why the first January is the painful one

The reason that first bill feels so brutal is that two things land at once. On 31 January you pay the balancing payment for the year just ended and your first payment on account for the year ahead - which is half your bill again. So a £3,000 bill becomes £3,000 + £1,500 = £4,500 in one go, with another £1,500 following in July. After that first year the system settles down: you're always paying roughly a year's tax spread across two dates, so it stops feeling like double. But that first January catches almost everyone out, which is why setting money aside from day one matters so much.

Budgeting so it never hurts

The cure is simple: treat tax as money that was never yours. As you earn, move a percentage of your profit into a separate savings account - 20% if you're a basic-rate taxpayer, closer to 30% if you're a higher earner, and a little more on top for Class 4 National Insurance. By the time January arrives, the balancing payment and the first payment on account are already covered. Our Self-Employed Tax Calculator and Self Assessment Tax Calculator help you estimate the underlying bill so you know what percentage to set aside, and if you keep your records in our MTD Quarterly Record Organiser you'll always have a running view of your profit.

Can you reduce your payments on account?

Yes - and sometimes you should. If you know your income is going to fall (you've wound down a business, lost a major client, or moved to employment), you can apply to HMRC to reduce your payments on account so you're not handing over tax on income you won't earn. You can do this through your online account or on the return itself. But there's a catch: if you reduce them too far and end up owing more than you paid, HMRC charges interest on the shortfall. So reduce them based on a realistic forecast, not wishful thinking. If your income is rising, you don't need to do anything - you'll simply pay the difference as a balancing payment.

What's included and excluded

Payments on account are based on your income tax and Class 4 National Insurance only. They exclude Capital Gains Tax and student loan repayments, which are always settled in the balancing payment instead. So if a chunk of last year's bill was CGT on selling a property or some shares, your payments on account will be lower than half your total bill, because the CGT element is stripped out. This calculator focuses on the core income-tax-and-NI figure, which is what drives the payments on account.

Deadlines, interest and penalties

The two dates to burn into your memory are 31 January and 31 July. Miss them and HMRC charges interest from the due date until you pay, and persistent lateness can lead to penalties. Interest rates on late tax are linked to the Bank of England base rate and have been historically high recently, so paying on time is genuinely worth money. If cash flow is tight, HMRC's Time to Pay arrangements can spread the cost - but it's far better to have the money set aside in advance. If you've already missed a deadline, our Self Assessment Penalty Calculator estimates what you might owe.

How this fits your wider tax picture

Payments on account are just one piece of staying on top of Self Assessment. Estimate the underlying bill with our self-employment and Self Assessment calculators, keep clean digital records ready for Making Tax Digital with the Quarterly Record Organiser, and if you're a landlord use the Landlord Organiser to handle Section 24. Together they give you a clear view of what you owe and when - turning the January deadline from a dreaded surprise into a date you're fully prepared for.

The bottom line

Payments on account aren't an extra tax - they're the same tax, paid earlier and in instalments. The people who find them stressful are the ones who don't see them coming; the people who find them painless are the ones who set money aside as they earn. Use the calculator above to see whether they apply to you and how much each instalment will be, then build your tax pot accordingly. Do that, and you'll never be ambushed by a January bill again.

A full worked example through two years

Let's follow Maya, a freelance illustrator, through her first two years to see how payments on account really behave. In year one she makes a profit that leaves her with a tax-and-NI bill of £4,000, due 31 January. Because the bill is over £1,000 and none of her tax was collected at source, HMRC also asks for a first payment on account of £2,000 (half the bill) on the same date, and a second £2,000 on 31 July. So her year-one January total is £6,000, with another £2,000 in July - £8,000 in all, even though she "only" owed £4,000 for the year.

In year two, suppose her actual bill comes out at £4,600. She has already paid £4,000 through her two payments on account, so on 31 January she pays a balancing payment of just £600 - plus the first payment on account for year three, £2,300 (half of £4,600). From year two onwards the rhythm is steady: she's always roughly a year ahead, paying in two instalments. The shock is entirely in year one, when the system asks for a year and a half of tax at once. Knowing this in advance is the difference between a manageable bill and a financial emergency.

Frequently asked questions

Do payments on account earn or cost interest? If you pay on time, no. If you pay late, HMRC charges interest from the due date. If you overpay (because your next bill is lower), HMRC repays the difference and may add a small amount of interest in your favour. What if I stop being self-employed? You can apply to reduce your payments on account to nil if you genuinely expect no further liability - but keep evidence, and don't reduce them on a hunch. Are they the same as the tax I owe? Effectively yes - they're not an extra charge, just your tax paid earlier and in two parts. They're credited in full against your eventual bill.

If you'd like to model the whole journey from profit to bill to instalments, use our Self Assessment Tax Calculator to estimate the bill, this calculator to size the instalments, and the MTD Quarterly Record Organiser to keep the records that feed both. For the official deadlines and payment methods, GOV.UK's pay your Self Assessment tax bill guidance is the definitive reference.

Who should use this calculator

Payments on account are advance instalments towards next year’s tax, and they are the single most common reason a first Self Assessment bill is far larger than expected. Once your bill passes the threshold, you pay it in full plus half again in January, and another half in July.

That means a first-year bill of £4,000 becomes £6,000 due in January and £2,000 in July — £8,000 of payments against £4,000 of tax. The money is not lost, it is prepaid, but the cash-flow shock catches out enormous numbers of new sole traders.

What this calculator assumes

• Payments on account apply where the previous year’s bill exceeded the threshold and less than 80% was collected at source.
• Each payment is half of the previous year’s liability.
• They are due 31 January and 31 July.
• Any difference is settled by a balancing payment the following January.

Limitations — what it does not cover

• Reducing payments on account, which you can claim if income has genuinely fallen — but HMRC charges interest if you reduce them too far.
• Class 4 National Insurance, included in the calculation.
• Capital gains, which are excluded from payments on account.
• The first year, where no payments on account are due but the following January carries both.
• Interest on late payment, which accrues from each due date.
• Time to Pay, available if you cannot meet an instalment.