Payments on account explained simply
Self Assessment is not only about the balancing payment for last year. If your Income Tax and Class 4 National Insurance bill was large enough, HMRC usually asks for payments on account — advance instalments toward the next year. Each instalment is normally half of the prior-year relevant liability. The first is due on 31 January (the same day as the balancing payment). The second is due on 31 July.
That is why January shocks people. You may pay (1) whatever is left for the year just finished and (2) half of that bill again as a prepayment. Cash-flow planning matters as much as the percentage arithmetic.
When payments on account apply
In outline, POAs usually apply if last year’s relevant Self Assessment liability was £1,000 or more and less than 80% of the tax you owed was collected at source (for example through PAYE). Capital Gains Tax and student loan repayments are generally handled differently and are not treated like Income Tax for this purpose.
What this calculator shows
Enter last year’s Income Tax + Class 4 NI liability and how much was already paid at source. We flag whether POAs look due, show each 50% instalment, and approximate the January cash need if you still owe a balancing amount. Year labels are editable so you can match the return you are filing.
Reducing payments on account
If you expect a lower bill — for example you closed a trade or your contract ended — you can claim to reduce POAs. Reduce too far and underpay, and interest can apply. If income rose, HMRC will not always send a friendly warning early enough; budget for a larger balancing payment the following January.
Budgeting tips
- Stand up a separate savings pot the day you file.
- Divide the expected January total by the months you have left and automate transfers.
- If you are a company director taking dividends, remember personal POAs and corporation tax deadlines are different calendars.
- Check your HMRC online account for the exact statement rather than relying only on a spreadsheet.
Worked example
Jordan’s 2025/26 Self Assessment liability is £6,000, almost all unpaid at source. Balancing payment due 31 January 2027: £6,000. First POA toward 2026/27: £3,000 on the same day. Second POA: £3,000 on 31 July 2027. January outflow before any voluntary payments: about £9,000.
Limitations
This is a simplified educational model for 2026/27 planning conversations. It is not a substitute for your HMRC statement, and it is not tax advice.
Balancing payment versus payments on account
Think of three buckets. Bucket A is tax already collected at source. Bucket B is the balancing payment that finishes last year. Bucket C is the pair of payments on account that prepay next year. Your January payslip from HMRC often combines B and the first half of C. July is usually only the second half of C, unless other charges sit on the account.
Class 4 National Insurance
Self-employed people should remember Class 4 NI feeds into the liability that drives POAs. A year with high profits raises both Income Tax and Class 4, which raises next year’s advances. When profits fall, reducing POAs can avoid overpaying HMRC interest-free credit — but document your forecast.
Directors, salary and dividends
PAYE on salary can push you over the 80% collected-at-source test and remove POAs even when dividends are large — or not, depending on the mix. Do not assume “I have a PAYE job, so no POAs”. Run the numbers from last year’s SA calculation pages.
Interest, penalties and timing
Late balancing payments and late POAs can attract interest. Penalties for late returns are a separate regime. Paying early into your HMRC account can help, but always allocate payments correctly online so they settle the right charge.
Cash-flow calendar template
- April–December: save monthly toward January.
- Early January: reconcile your draft SA calculation.
- 31 January: balancing + first POA.
- Spring: reassess whether July POA should be reduced.
- 31 July: second POA.
If you use an accountant, ask them to send a January funding note every autumn. Surprises are expensive.
How this differs from corporation tax
Limited companies pay corporation tax on company profits on different deadlines. Personal POAs do not replace company CT. Owner-managers must calendar both systems.
Using your HMRC personal tax account
The amounts on your Self Assessment statement override any website estimate. After you file, refresh the account, screenshot the charges, and schedule bank payments with enough clearing time before 31 January and 31 July.
Voluntary payments
You can pay HMRC early even without a POA demand. Early payments can reduce January stress. Reference the correct payment reference so funds land on Self Assessment rather than another tax type.
Closing
This calculator is a planning aid for 2026/27 conversations, not a replacement for your HMRC statement or professional advice.
Source: Understand your Self Assessment tax bill — payments on account.