Payments on account, explained
The single most common shock for a new sole trader: the first January bill is 150% of what you expected. Here is why, with dates.
What they are
If your Self Assessment bill (income tax plus Class 4 NI) is more than £1,000, and less than 80% of your tax was collected at source (PAYE), HMRC asks you to pay next year's tax in advance, in two instalments of half your current bill each:
- 31 January — balance for the year just ended plus first payment on account for the current year.
- 31 July — second payment on account.
Worked example
Your 2026/27 bill is £6,000, your first year. On 31 January 2028 you pay £6,000 (balance) + £3,000 (first payment on account for 2027/28) = £9,000. On 31 July 2028 you pay another £3,000. When the 2027/28 return is done, whatever is left after the £6,000 already paid is due on 31 January 2029 — together with the first payment on account for 2028/29.
How to reduce them
If you know your income is falling you can ask HMRC to reduce payments on account, on the return or through your online account (form SA303). Reduce them too far and HMRC charges interest on the shortfall, so estimate honestly.
What does not count
Capital gains tax and student loan repayments are settled on 31 January only; they are not spread into payments on account. Class 2 NI no longer applies for most people.
The sole trader calculator shows whether payments on account will apply to your figures and the two amounts.
Rates and thresholds for 2026/27, checked against GOV.UK on 20 September 2026. England, Wales and Northern Ireland. Not tax advice.