What is Payment on Account? A Plain English Guide
If your Self Assessment tax bill is over £1,000, HMRC expects you to pay for the next year in advance. These are called Payments on Account, and they often surprise new self-employed people.
How does Payment on Account work?
When your yearly tax bill goes over £1,000, HMRC assumes you will earn a similar amount next year. To make sure you do not fall behind, they ask you to pay your next bill in two advance instalments. You pay 50% on 31 January and the other 50% on 31 July.
A simple example
Imagine you are a new sole trader, and your tax bill for the 2026/27 tax year is £3,600. Since this is over £1,000, here is how you pay:
On 31 January 2028, you must pay:
Can I reduce my Payments on Account?
Yes, you can. If you know your profits will drop: maybe you lost a client or took time off: you can ask HMRC to lower your payments. You can do this through your online tax account. Be careful though: if you lower them too much and end up earning more, HMRC will charge you interest on the difference.
To plan ahead and avoid surprises, use our free Sole Trader Tax Calculator to estimate your payments.