Payments on Account Calculator

Calculate your HMRC payments on account for UK self-assessment. Payments on account are advance payments towards the current year's tax bill based on last year's liability. Find out if you need to make them, how much each payment is, and what your total first-year outlay will be.

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How HMRC Payments on Account Work

Payments on account are advance payments towards your next tax bill, calculated by HMRC based on the amount of tax you owed in the previous year. If your self-assessment tax bill for the previous year was more than £1,000 and less than 80% of the tax due was collected at source through PAYE or other deduction methods, HMRC will require you to make two advance payments on account for the current tax year. Each payment on account is equal to half of your previous year's total tax liability that was not deducted at source. This system is designed to help spread the cost of your tax bill across the year and prevent taxpayers from facing an unexpectedly large bill in January.

The payments on account system can be confusing for those new to self-assessment because in your first year of making payments on account, you effectively pay 150% of your annual tax bill. This happens because you pay the full amount of the previous year's tax bill (the balancing payment) plus the first payment on account for the current year, all due on 31 January. The second payment on account for the current year is then due on 31 July. In subsequent years, the system evens out because your payments on account from the previous year are credited against your current year's liability. However, the initial shock of that first year's total payment catches many self-employed workers off guard, making it essential to plan ahead using a tool like this calculator.

Payments on Account Formulas

Bill for POA = Last Year's Tax Bill − Tax Deducted at Source

Each Payment on Account = Bill for POA ÷ 2

Total First Year = Last Year's Tax Bill + First Payment on Account

Where:

  • Bill for POA = The portion of your tax bill not already covered by PAYE or other deductions
  • No POA required if Bill for POA is less than £1,000 or more than 80% was deducted at source
  • January Payment = Balancing payment for last year + first payment on account for current year
  • July Payment = Second payment on account for current year

When Are Payments on Account Due?

Payments on account follow a fixed schedule aligned with the self-assessment deadlines. The first payment on account is due on 31 January during the tax year to which it relates. For example, the first payment on account for the 2024/25 tax year is due on 31 January 2025. The second payment on account is due on 31 July following the end of the tax year, so the second payment for 2024/25 is due on 31 July 2025. If your actual tax liability for the year turns out to be higher than the combined payments on account, you will need to make a balancing payment by the following 31 January. Conversely, if your payments on account exceed your actual liability, HMRC will issue a refund or credit the overpayment against future tax obligations.

Can You Reduce Your Payments on Account?

If you expect your current year's tax bill to be lower than the previous year, you can apply to reduce your payments on account. This is common when your income has decreased, you have higher business expenses, or you have started paying more tax through PAYE. You can reduce your payments on account online through your HMRC self-assessment account or by completing form SA303. However, it is important to be accurate when estimating your reduced income because if your actual tax bill turns out to be higher than the reduced payments on account, HMRC will charge interest on the underpayment. Many tax advisors recommend only reducing payments on account when you are confident your income has genuinely decreased to avoid interest charges and potential penalties.

Example Calculations

Example 1: £5,000 Tax Bill with No PAYE

A self-employed worker had a total tax bill of £5,000 with no tax deducted at source.

  • Bill for POA = £5,000 − £0 = £5,000 (exceeds £1,000, POA required)
  • Each Payment on Account = £5,000 ÷ 2 = £2,500
  • January: £5,000 (balance) + £2,500 (first POA) = £7,500
  • July: £2,500 (second POA)

Example 2: £3,000 Tax Bill with £1,000 PAYE

A worker with both employment and self-employment income had a £3,000 bill with £1,000 deducted through PAYE.

  • Bill for POA = £3,000 − £1,000 = £2,000 (exceeds £1,000, POA required)
  • Each Payment on Account = £2,000 ÷ 2 = £1,000
  • January: £3,000 (balance) + £1,000 (first POA) = £4,000
  • July: £1,000 (second POA)

Example 3: £800 Tax Bill (No POA Required)

A part-time freelancer had a total tax bill of £800.

  • Bill for POA = £800 (below £1,000 threshold)
  • No payments on account required
  • January: £800 (full balance only)

The Balancing Payment Explained

The balancing payment is the difference between your actual tax liability for the year and the payments on account you have already made. If your tax bill for the year is exactly twice the amount of each payment on account, your balancing payment will be zero. If your income has increased, you will owe a balancing payment on top of your payments on account. If your income has decreased, you may receive a refund. The balancing payment is due on 31 January following the end of the tax year, at the same time as the first payment on account for the next tax year. This dual payment deadline in January is why it is crucial to plan ahead and maintain adequate tax savings throughout the year.

Planning for Your First Year of Payments on Account

The first year of making payments on account can be financially challenging because you are essentially paying last year's full tax bill plus an advance payment for the current year simultaneously. For example, if your tax bill is £6,000, your January payment will be £9,000 (the £6,000 balance plus a £3,000 first payment on account), followed by a £3,000 July payment. This totals £12,000 across the year for what might otherwise be a £6,000 annual liability. It is strongly recommended to begin setting aside extra money as soon as you know you will enter the payments on account system, ideally saving at least 1.5 times your expected monthly tax set-aside amount to build a sufficient buffer for that first year.