{"id":168,"date":"2026-03-11T07:43:38","date_gmt":"2026-03-11T07:43:38","guid":{"rendered":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/?p=168"},"modified":"2026-03-11T07:43:38","modified_gmt":"2026-03-11T07:43:38","slug":"understanding-hmrc-payments-on-account","status":"publish","type":"post","link":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/2026\/03\/11\/understanding-hmrc-payments-on-account\/","title":{"rendered":"Understanding HMRC Payments on Account"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-medium wp-image-169\" src=\"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-content\/uploads\/2026\/03\/Understanding-HMRC-Payments-on-Account-300x195.png\" alt=\"\" width=\"300\" height=\"195\" srcset=\"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-content\/uploads\/2026\/03\/Understanding-HMRC-Payments-on-Account-300x195.png 300w, https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-content\/uploads\/2026\/03\/Understanding-HMRC-Payments-on-Account-1024x666.png 1024w, https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-content\/uploads\/2026\/03\/Understanding-HMRC-Payments-on-Account-768x499.png 768w, https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-content\/uploads\/2026\/03\/Understanding-HMRC-Payments-on-Account.png 1446w\" sizes=\"auto, (max-width: 300px) 100vw, 300px\" \/><\/p>\n<p>Over the years, Payments on Account have been a source of confusion for many taxpayers, particularly those who are new to the Self-Assessment system or whose tax liability has exceeded \u00a31,000 for the first time.<\/p>\n<p>Many individuals are often surprised to discover that settling their annual tax bill may also require advance payments towards the following year\u2019s tax liability. Understanding how this system works can help you plan your finances better and avoid unexpected tax demands.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>What Are Payments on Account?<\/strong><\/p>\n<p><!--more--><\/p>\n<p>Payments on Account are HMRC\u2019s method of collecting Income Tax in advance. They are calculated based on your previous year\u2019s Self-Assessment tax liability.<\/p>\n<p>These payments normally apply to self-employed individuals, company directors, and other taxpayers who report income through Self-Assessment.<\/p>\n<p>It is important to note that Payments on Account are calculated on the Income Tax and Class 4 National Insurance element of your tax bill. They do not include Capital Gains Tax or Student Loan repayments.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Who Needs to Make Payments on Account?<\/strong><\/p>\n<p>You will usually be required to make Payments on Account if:<\/p>\n<ul>\n<li>Your Self-Assessment tax bill is more than \u00a31,000, and<\/li>\n<li>Less than 80% of your tax has already been collected at source, for example through PAYE.<\/li>\n<\/ul>\n<p>This often affects individuals with self-employment income, rental income, investment income, or company directors receiving dividends.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>When Payments on Account Do Not Apply<\/strong><\/p>\n<p>Payments on Account are not required where:<\/p>\n<ul>\n<li>Your tax bill is less than \u00a31,000, or<\/li>\n<li>80% or more of your tax has already been deducted at source, such as through PAYE.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>Payment Schedule<\/strong><\/p>\n<p>Payments on Account are split into two instalments, each representing 50% of the previous year\u2019s tax liability.<\/p>\n<p>The payment dates are:<\/p>\n<ul>\n<li>31 January \u2013 First Payment on Account (50%)<\/li>\n<li>31 July \u2013 Second Payment on Account (remaining 50%)<\/li>\n<\/ul>\n<p>In addition, a balancing payment may be due on 31 January of the following year once the final tax liability for that year has been calculated.<\/p>\n<p>&nbsp;<\/p>\n<p><strong>Why Payments on Account Cause Confusion<\/strong><\/p>\n<p>Many taxpayers find Payments on Account challenging because the payments are based on last year\u2019s income, which may not reflect their current financial situation.<\/p>\n<p>For example:<\/p>\n<ul>\n<li>If your income falls, you may end up paying more tax in advance than necessary.<\/li>\n<li>If your income increases, you may still face a balancing payment at the end of the year.<\/li>\n<li>Late or insufficient payments may result in interest charges and potential penalties from HMRC.<\/li>\n<\/ul>\n<p>&nbsp;<\/p>\n<p><strong>Practical Tips for Managing Payments on Account<\/strong><\/p>\n<p>To avoid surprises and manage your cash flow effectively:<\/p>\n<p>\u2714 Review your expected income regularly during the year<br \/>\n\u2714 Consider applying to reduce your Payments on Account if you expect your profits to fall<br \/>\n\u2714 Plan your cash flow ahead of the January and July deadlines<br \/>\n\u2714 Seek professional advice where necessary<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Over the years, Payments on Account have been a source of confusion for many taxpayers, particularly those who are new to the Self-Assessment system or whose tax liability has exceeded \u00a31,000 for the first time. Many individuals are often surprised to discover that settling their annual tax bill may also require advance payments towards the [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"om_disable_all_campaigns":false,"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-168","post","type-post","status-publish","format-standard","hentry","category-tax-insights-blog"],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/posts\/168","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/comments?post=168"}],"version-history":[{"count":1,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/posts\/168\/revisions"}],"predecessor-version":[{"id":170,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/posts\/168\/revisions\/170"}],"wp:attachment":[{"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/media?parent=168"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/categories?post=168"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/juliusandjuliusandassociates.co.uk\/blog\/wp-json\/wp\/v2\/tags?post=168"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}