Payments on account explained: dates, rules and MTD

Payments on account are advance payments towards your tax bill for the current tax year. HMRC bases them on the tax you owed for the previous year, so you pay part of this year’s bill before the year’s figures are final. They include Class 4 National Insurance if you are self-employed.

There are two payments, and each one is half of the tax you owed last year. If your last bill was larger than this year’s turns out to be, you have paid too much. If it was smaller, you pay the difference at the end. Either way, the two payments are a starting point, not the final answer.

Sole traders and landlords meet payments on account once their Self Assessment bill reaches a certain size. They are often the biggest surprise in the first year, because the first payment on account falls on the same day as the bill for the year before.

The two payments on account are due by midnight on 31 January and 31 July. The 31 January payment falls during the tax year it relates to, and the 31 July payment falls after that tax year has ended. Any balancing payment for the year is due by midnight on 31 January the following year.

The table shows the pattern for the 2026 to 2027 tax year, which is the first year of Making Tax Digital for Income Tax for people who joined in April 2026. The dates are the same whether or not you use MTD.

The balancing payment settles the difference between your actual bill for the year and the payments on account you made. If your income went up, the balancing payment covers the extra tax. HMRC says it can also include anything you owe for capital gains or student loans if you are self-employed.

If you did not make any payments on account last year, for example because it was your first Self Assessment bill, you pay the full amount of your tax calculation by 31 January. You also pay your first payment on account towards your next bill on that same day. This is why the first year can feel expensive.

HMRC sets two conditions. If either one applies to you, you do not have to make payments on account for the year.

• The amount of tax you owed last year was less than £1,000.
• Last year you paid more than 80% of the tax you owed outside of Self Assessment, for example through your tax code.

This fictional example starts from a stated bill and only halves it. It does not work out any tax from income, because your real bill comes from HMRC’s calculation of your own figures.

Say your Self Assessment bill for the 2025 to 2026 tax year was £6,000. You owed more than £1,000 and paid less than 80% of your tax outside Self Assessment, so payments on account apply. You made no payments on account for 2025 to 2026 because it was your first bill.

Yes. If you expect your tax bill to be lower than last year, you can ask HMRC to reduce your payments on account. You can do it online through your HMRC account, using the option to reduce payments on account, or by post using form SA303.

The risk is interest. If you reduce your payments on account and your tax bill turns out higher than expected, HMRC charges interest on the difference. In the example above, if you cut each payment to £2,000 and the bill still came to £6,000, you would pay interest on the £2,000 shortfall across the two payments.

Base any reduction on real figures, not hope. Under MTD you can see an estimate of your tax for the year to date after each quarterly update. It is an estimate based on what you have sent so far, so it can change as the year goes on.

No. HMRC says Making Tax Digital for Income Tax will not change the way you pay tax or the dates that payments are due. Quarterly updates are summaries of your income and expenses, not tax returns and not payments. Sending an update does not create a bill.

You still pay by 31 January and 31 July, and the balancing payment is still due on 31 January after the tax year ends. The tax return deadline under MTD is also 31 January after the tax year ends. HMRC calls the tax return under MTD the final declaration.

What MTD does add is visibility. After each update you can get an estimate of your tax bill for the year to date, in your software and in your HMRC account. In SimpleTaxFlow you see HMRC’s calculation after each update, with our own estimate shown separately and labelled as an estimate.

HMRC’s guidance for MTD says late payment penalties do not apply to any payments on account. That does not make paying late free. Late payment interest still applies, and HMRC says there are no changes to how late payment interest works.

The balancing payment is different. Under the new penalty regime, a late balancing payment can lead to late payment penalties as well as interest. If you cannot pay in full, contact HMRC early about a payment plan, because keeping to an agreed plan pauses penalties.

Tax rules can change and your circumstances matter. Use HMRC’s current guidance to confirm what applies to you.