Payments on account explained

The first time payments on account apply, you pay last year’s tax plus the first payment on account for the current year on the same 31 January — roughly 150% of a normal bill at once. It catches out nearly every first-time filer. Nothing has gone wrong: you’re simply moving from paying fully in arrears to paying partly in advance. After the first year it settles into a steady rhythm.

• Each payment on account is normally half of last year’s tax bill
• 31 January — first payment on account (with the balancing payment for the year just ended)
• 31 July — second payment on account
• The following 31 January — a balancing payment or refund settles the actual figure

You make payments on account if your Self Assessment bill was over £1,000 and less than 80% of your tax was collected at source. Directors taking significant dividends often fall into this, because dividend tax isn’t collected through PAYE. Those with mostly PAYE-taxed income usually don’t.

Director Self Assessment →

If you genuinely expect lower income this year, you can apply to reduce your payments on account so you’re not overpaying. But cut them too far and HMRC charges interest on the shortfall — so it needs a realistic estimate, not wishful thinking. We calculate the right figure and manage it with your return.

What a Self Assessment return costs →

We prepare your return, tell you exactly what’s due and when (including payments on account), and reduce them where it’s justified — so there are no nasty January surprises. Call 0114 327 1480.

Our Self Assessment service →