Everything you need to know about paying your self-assessment on account

HMRC may tell you to make "payments on account" if you pay less than 80% of your income tax at source and have a tax debt of more than £1,000 in the UK. This tutorial describes what payments on account are, when they're due, and what to expect when making your first payment on account.

What are account payments?

Payments on account are contributions to your income tax for the following year. The amount you must pay for each payment on account is half of your tax bill from the previous year. So, if your tax bill for this tax year is £1,500, you'll have to make two account payments totaling £1,500 for next year's amount.

Making account payments

Account payments are due on the 31st of January throughout the tax year and the 31st of July shortly after it ends. For example, you may be directed to make payments on account toward the tax you'll have to pay on your income for the 2021/22 tax year on 31st January 2022 and 31st July 2022, even if your tax return for that year isn't due until 31st January 2023.

If you pay too much tax, HMRC will refund the difference to you, either by cheque or bank transfer, or by subtracting it from your next tax bill.

Requesting a reduction in your account payments

You may know ahead of time that you will overpay on account since your tax bill will be smaller next year. This could be because you're closing down your firm or because you've reached retirement age and won't have to pay class 4 National Insurance any longer. If this is the case, you can request a reduction in your account payments from Hmrc.

Payments must be balanced.

On the other hand, it's possible that when you finish your tax return, you'll discover that this year's tax bill is larger than previous year's, and you owe more money than you've already paid. If this is the case, you must pay HMRC a "balancing payment" by January 31st of the following tax year.

For example, if you paid £1,500 on account towards your 2020/21 tax bill but later discovered that you owe £1,700 when filing your tax return, you'll need to make a "balancing payment" of £200 to HMRC by January 31, 2022.

For the first time, I'm paying on account.

When you make payments on account for the first time, whether in your first year of business or when your tax bill exceeds £1,000 in a tax year, it's crucial to know what to expect.

If you started trading in 2020/21 and owe £1,400 in taxes for that year, and you didn't have any tax deducted at source, your tax bill is due on January 31, 2022. However, because your tax cost exceeds £1,000, you'll have to pay your first payment on account (£700, half of the previous year's tax bill) for 2020/21 by January 31, 2022, on top of your tax bill. This implies you'll owe HMRC £2,100 on January 31, 2022.