Tool
Payments on account calculator
Payments on account are advance instalments toward next year's Self Assessment bill, due 31 January and 31 July. They are not an extra tax — they are the same tax, collected earlier. Work out what actually leaves your account, and when.
Sets this year's instalments — each is half of it. Enter £0 if this is your first year in Self Assessment.
Your actual liability once known. It drives the balancing payment and resets next year's instalments.
PAYE — and CIS deductions, which is the part most subcontractors miss. More than 80% of your bill collected this way exempts you entirely.
Not covered by payments on account. It lands whole in the balancing payment.
Also excluded from the instalments — collected through the balancing payment for the self-employed.
- Each instalment this year
- £2,000.00
- Balancing payment
- £3,000.00
- Next year's instalment
- £3,500.00
- Due 31 January
- £6,500.00
- Due 31 July
- £3,500.00
If you cannot pay, Time to Pay can normally be arranged online for £30,000 or less, within 60 days of the due date, over up to 12 monthly instalments. The return has to be filed first.
Reducing an instalment is a bet, not admin. Underpay and the shortfall carries 7.75% from the date it was due; overpay and it earns 2.75%. The spread runs one way — being slightly too high is much cheaper than being slightly too low.
Illustration only — not tax, legal or accounting advice. Assumes a standard two-instalment cycle and steady circumstances.
Payments on account, answered
- Who has to make payments on account?
- Everyone in Self Assessment except two groups. You are exempt if last year's bill was under £1,000, or if more than 80% of the tax you owed was already collected outside Self Assessment. Either one alone is enough. Fall outside both and you are in the system automatically — there is nothing to opt into and nothing to sign.
- Why is my second January so much bigger?
- Because it carries two years at once. The balancing payment for the year just ended lands on the same day as the first instalment for the year ahead. On a £4,000 bill that is £4,000 plus £2,000, so £6,000 leaves your account against a £4,000 tax year — around 150% of a normal year. It is a one-off transition, not a permanent state: once you are in the cycle a steady income means the balancing payment is roughly nil.
- Do CIS deductions count toward the 80% test?
- Yes, and this is the exemption most subcontractors miss. Contractors deduct 20% from your labour payments, or 30% if you are unverified, and that is tax paid outside Self Assessment exactly like PAYE. For a subcontractor whose income is mostly CIS labour it routinely covers more than 80% of the year's liability, which means no payments on account at all.
- Should I apply to reduce my payments on account?
- Only when the fall in income is known rather than hoped for — you stopped trading, lost a contract worth a third of your revenue, took a salaried job. The reason is the interest spread: underpay and the shortfall carries 7.75% from the date it was due, overpay and it earns you 2.75%. That is five points against you if you are wrong, so reducing because January is expensive is borrowing from HMRC at 7.75% without the paperwork. If in doubt, reduce by less than you think.
- What do payments on account not cover?
- They cover Income Tax and Class 4 National Insurance only. Capital Gains Tax and student loan repayments are excluded and land whole in the balancing payment. So someone who sold a rental property can face the balancing payment, the CGT, the student loan and the next year's first instalment all in the same January — the instalments smoothed one part of the bill and left the rest bunched.