HM Revenue and Customs describes payments on account as advance sums towards the next tax bill, including Class 4 National Insurance for the self-employed. Each payment is usually half of the tax owed the year before. They are due by midnight on 31 January and by midnight on 31 July. Where those payments apply, a self-employed taxi or private hire driver who made none the year before can be asked, that first January, for the whole bill and half of it again. Payments on account
The £4,500 example
For someone who made no payments on account the year before, the worked example takes a bill of £3,000 for 2023 to 2024. The total due by midnight on 31 January 2025 is £4,500. Of that, £3,000 is the bill for 2023 to 2024 and £1,500 is the first payment on account towards 2024 to 2025. A second £1,500 is due on 31 July 2025.
If the 2024 to 2025 bill is more than £3,000, a balancing payment is due by 31 January 2026 as well as the first payment on account for the next year. If the bill is £3,000, the only sum due on 31 January 2026 is the first payment on account for the following year.
When the two payments are not due
They are not required if the tax owed last year was less than £1,000, or if more than 80% of that tax was paid outside Self Assessment. A tax code is one example. Interest a bank has already deducted from savings is another. The Self Assessment statement, or the online account, shows the amounts where they apply.
After payments the year before
In the other worked example the 2023 to 2024 bill is again £3,000, after £900 paid on 31 January 2024 and £900 on 31 July 2024. Those payments on account came to £1,800, so the balancing payment is £1,200. With the first payment on account of £1,500, the amount due by midnight on 31 January 2025 is £2,700. Another £1,500 is due on 31 July 2025.
A balancing payment is what remains after payments on account are deducted from the tax owed. It is due by midnight on 31 January the following year, and it includes anything owed for capital gains or student loans. If the 2024 to 2025 calculation is above £3,000, a balancing payment is due by 31 January 2026.
A lower figure
Where the tax owed is going to be lower than last year, the payments can be reduced online or by post. On the latest return the option is Reduce payments on account. By post, form SA303 goes to the tax office. The claim has to include the amount expected to be made, which is used to work out the new payments. If the bill is higher than expected, interest is charged on the difference.