Payments on account explained: why your first tax bill is so big
What HMRC payments on account are, when you have to make them, why your first Self Assessment bill can be 150% of what you expected, and how to reduce them if your income falls.
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Who has to make payments on account?
You have to make them if both of these are true for your last tax year:
- Your Self Assessment bill was more than £1,000.
- Less than 80% of your total tax was collected at source, for example through PAYE on your salary.
Many people with a small side hustle and a full-time job escape them, because most of their tax is already taken through PAYE. They usually catch people whose side income has grown, or who are fully self-employed.
How they work
Each payment on account is half of your previous year's Self Assessment bill:
| Date | What you pay |
|---|---|
| 31 January | Balancing payment for last tax year, plus the first payment on account for this year |
| 31 July | Second payment on account for this year |
Next January, HMRC works out the real bill. If you paid too much, it is refunded or knocked off. If too little, you pay the difference as the balancing payment.
Why the first bill is such a shock
In your first year, you pay last year's bill and half of it again in advance.
Example: your Self Assessment bill for 2025/26 is £2,400.
- 31 January 2027: £2,400 balancing payment + £1,200 first payment on account = £3,600
- 31 July 2027: second payment on account = £1,200
So £4,800 goes out within six months, double the £2,400 you were expecting. From the second year it evens out, because the advance payments already cover most of each bill.
Free toolSide hustle tax calculatorSee how much tax and National Insurance you owe on side income, and what to set aside each month.Can you reduce payments on account?
Yes. If you expect this year's income to be lower, for example because you stopped your side hustle, you can ask HMRC to reduce them online or with form SA303.
Be careful: if you reduce them too far and end up owing more, HMRC charges interest on the shortfall.
How to prepare
- Set aside tax monthly in a separate savings account, so January is not a scramble.
- Budget for your first year at about 150% of the bill.
- Check your statement in your HMRC online account before 31 January and 31 July.
Changes coming in 2029
The October 2026 Budget announced that from April 2029, people who make payments on account will make more regular, automated payments during the year, with the option to pay through PAYE. The aim is to avoid large lump sums. Details are still to be published.
Common questions
Why do I have to pay tax in advance?
Payments on account spread your tax across the year it is earned, similar to how PAYE works for employees, rather than collecting it all long after the year ends.
Do I get payments on account back if I overpay?
Yes. Any overpayment is refunded or set against your next bill once your return for the year is processed.
Do payments on account apply if I stop self-employment?
They are based on last year's bill, so HMRC will still ask. If your income has stopped, apply to reduce them to zero.
This is general information, not personal tax or financial advice. Tax rules change and depend on your circumstances, so check GOV.UK or speak to an accountant before acting.