HMRC Payment on Account Schedule
Payments on Account are advance prepayments toward your UK Self Assessment tax bill required by HM Revenue & Customs (HMRC).
If your annual tax and National Insurance bill from self-employment, landlord rental income, or dividends exceeds £1,000 (and less than 80% of your tax was collected at source via PAYE), HMRC automatically enrols you into the Payments on Account system. You must make two advance payments each year—each equal to 50% of your previous year’s tax liability.
⚙️ Rules & Thresholds
- HMRC Payment Deadlines:
- 31 January (Deadline 1): You pay the Balancing Payment for the tax year just ended + the First Payment on Account (50%) for the current tax year.
- 31 July (Deadline 2): You pay the Second Payment on Account (50%) for the current tax year.
- The £1,000 Exception Threshold: You do NOT have to make Payments on Account if your total tax bill was less than £1,000, or if more than 80% of your total tax was deducted at source via PAYE.
- Reducing Payments on Account: If you expect your profits or income to drop in the current tax year, you can submit an online claim via GOV.UK to reduce your Payments on Account. However, if you reduce them lower than your actual final tax bill, HMRC charges late payment interest and penalties.
📊 Practical Examples
- Prior Tax Year Bill: £4,800.00 (January & July POAs paid: £2,400 each)
- Current Tax Year Final Liability: £5,600.00
- Total Advance POAs Already Paid: £2,400 + £2,400 = £4,800.00
1. Balancing Payment (Due 31 Jan): £5,600 - £4,800 = **£800.00**
2. First Advance POA for Next Year (50% of £5,600): **£2,800.00**
Total Cash Required on 31 January: £800 + £2,800 = **£3,600.00**.
3. Second Advance POA (Due 31 July): **£2,800.00**.
📑 Common Pitfalls
- First-Year Tax Shock: In your first year of Self Assessment earning over £1,000 tax, your total 31 January payment is 150% of your annual tax bill (100% balancing payment + 50% advance POA).
- Reducing Payments on Account Incorrectly: Artificially reducing your POAs to ease cash flow when your profits haven’t actually dropped causes HMRC to backdate interest charges on the shortfall.
- Missing the 31 July Deadline: Many sole traders forget the 31 July deadline because it does not require filing a new tax return, triggering automatic HMRC interest charges.
❓ Frequently Asked Questions (FAQ)
Payments on Account are advance prepayments toward your next UK Self Assessment tax bill. HMRC requires self-employed individuals and landlords with tax bills over £1,000 to pay two 50% advance instalments on 31 January and 31 July.
Yes. If you know your self-employed profits or rental income will be lower than the previous tax year, you can log into your HMRC online account and request to reduce your Payments on Account to match your estimated lower liability.
If your advance Payments on Account end up exceeding your actual tax bill when you file your Self Assessment return, HMRC will credit your tax account and issue an automatic refund or apply the excess toward your next tax bill.
HMRC charges late payment interest on unpaid Payments on Account from the date they were due (31 January or 31 July) until full payment is received. The HMRC late payment interest rate is tied to the Bank of England Base Rate plus 2.5%.