If you’re self-employed, a CIS subcontractor, or a sole trader in the UK, you may have come across payments on account advance tax payments required by HMRC. For many, these payments come as a surprise and can feel overwhelming, especially after their first Self Assessment tax bill.
In this guide, we’ll explain how payments on account work, who they apply to, and most importantly, how to reduce them if your income drops or you’ve overpaid.
What Are Payments on Account?
Payments on account are advance payments towards your next year’s tax bill. HMRC assumes you’ll earn the same amount as the previous year, so they split the estimated bill into two instalments, each equal to 50% of your last tax bill (excluding student loan and capital gains tax).
These payments are due twice a year:
- 31 January
- 31 July
Who Has to Make Payments on Account?
You’ll be required to make payments on account if:
- Your last Self Assessment tax bill was over £1,000, and
- Less than 80% of your income tax was collected through PAYE
This mostly affects:
- CIS workers
- Self-employed individuals
- Freelancers and sole traders
If you’ve had a change in income, your payment amount might no longer be accurate.
Example of How It Works
| Tax Year | Tax Due | Payments on Account for Next Year |
|---|---|---|
| 2023–24 return (due Jan) | £3,000 | £1,500 in Jan 2025 + £1,500 in July 2025 |
| Total to pay by Jan 2025 | £4,500 | £3,000 for current + £1,500 towards next |
Then in July, you’ll need to pay the second £1,500 instalment even though the tax return for the next year hasn’t been submitted yet.
How to Reduce Payments on Account
If your income has decreased or your expected tax bill is going to be lower than last year’s, you can ask HMRC to reduce your payments on account.
How to Request a Reduction:
- Log in to your HMRC account via GOV.UK
- Go to: “Reduce payments on account”
- Enter your estimated income for the current tax year
- HMRC will recalculate your instalments
You can also do this through:
- The HMRC app
- Paper form SA303
- Or by using Tax2u to handle the process for you
What Happens If You Overestimate or Underestimate?
- Overestimated? You’ll pay more than you owe, but can request a refund later
- Underestimated? You’ll need to pay the difference plus interest if it’s late
That’s why it’s important to submit a realistic estimate or get expert help.
When You Should Consider Reducing Payments
You might want to reduce payments on account if:
- You’ve earned less this year than the previous one
- You’ve switched from self-employment to PAYE
- You’ve had long-term sickness or time off
- You’ve stopped working or retired
- You’re entitled to more deductible expenses this year
Let Tax2u Help You Reduce Payments on Account
If you’re unsure whether your payments on account are correct or how to reduce them Tax2u can handle it for you.
We’ll:
- Review your current income and expenses
- Accurately estimate your tax liability
- Submit the payment reduction request to HMRC
- Handle your full Self Assessment return
Save money
Avoid overpaying
No stress, no guesswork
Reduce your HMRC payments on account with Tax2u today our experts are here to help.