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HMRC's self-assessment payments on account

Writer's picture: Lewis ChapmanLewis Chapman

Updated: Feb 23, 2024

This post aims to help you understand your tax bill better by providing all the information you need to know about self-assessment payments on account.


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pre-paying your future tax bill

What are payments on account?

Payments on account are advance payments towards your next year's tax bill.

Who’s liable to make payments on account? Everyone submitting a self-assessment tax return is liable to make two payments on account unless:

  • Your self-assessment tax bill is less than £1000

  • You’ve paid more than 80% of your tax owed (perhaps because the majority of your earnings are through PAYE or private pensions)

How much do I have to pay?

For example:


  • 2020/2021 ➡ £800 tax bill ➡ £800 payment by 31 Jan 2022 as you are below the £1000 threshold.

  • 2021/2022 ➡ £2000 tax bill ➡ £3000 payment by 31 Jan 2023 (£2000 tax bill add 50% as a payment on account), then another £1000 by 31 July 2023 (the other 50% of your payments on account).

  • 2022/2023 ➡ £3000 tax bill ➡ £2500 payment by 31 Jan 2024 (£3000 tax bill plus £1500 payment on account for next year minus £2000 payment on account from last year), and then £1500 by July 2024.


Also, payments on account are not made on class 2 national insurance contributions, so the self-employed taxpayers' payments on account may be slightly less than 50% of their total tax.


Problems caused by payments on account.

HMRC ensures all payments made are used to cover your tax bills, and if your payments on account are too high, then you will be due a rebate. However, this does not mean that payments on account come without issues for people. For example:


  • 2021/2022 ➡ £2000 Tax bill ➡ £3000 by 31 Jan 2023 then £1000 by 31 July.

  • 2022/2023 ➡ After business booms you rack up a tax bill of £16,500 ➡ £22,750 by 31 Jan and £8250 by 31 July!


As you can imagine, after a substantial increase in earnings (by around £40,000 in this scenario) and now needing to pay £31,000 in tax may be difficult. Whilst next year should hopefully be okay due to the payments on account, similar scenarios have left many people this year in a challenging and stressful situation.


Getting help with your payments on account.

If you believe your payments on account will be too high compared to how much tax you will have to pay next year (perhaps you earned extra this year or will suffer a loss of earnings next year), then you can opt to reduce your payments on account. However, this does carry risk, as penalties are in place for those who do not pay enough on their payments on account after lowering them, but as long as it covers your future tax bill, then it’s okay.


Fortunately, HMRC has made time-to-pay arrangements easier to obtain, and many taxpayers are utilising them; for more information, read our post on this topic.


If you have any questions, please get in touch with us.

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