January is often the toughest month for self-employed workers and CIS subcontractors. Not only is it post-Christmas, but it’s also when Self Assessment (SA) tax payments are due.
If your bill feels higher than expected, there are legitimate, HMRC-approved ways to reduce your January SA payments and in some cases, spread the cost.
Why January SA payments can be high
Your January tax bill might include:
- Balance payment for the previous tax year
- First Payment on Account for the current tax year (if applicable)
Payments on account are advance payments towards your next tax bill, based on your previous year’s tax. This can make your January payment almost double what you expect.
Ways to reduce your January SA payments
1. Check if your payments on account can be reduced
If your current year’s income is lower than last year’s, you can ask HMRC to reduce your payments on account.
You can do this:
- Online via your HMRC account
- By sending form SA303 to HMRC
Be realistic – if you underpay, HMRC will charge interest.
2. Claim all allowable expenses
Reducing your taxable profit will reduce your bill. Common expenses for CIS workers and sole traders include:
- Tools and equipment
- Protective clothing
- Travel and mileage
- Business phone costs
- Professional fees
Even small expenses add up – review your records before filing.
3. Use capital allowances
If you’ve bought significant assets (like machinery or a van), you may be able to claim the Annual Investment Allowance (AIA) to offset the cost against your profits.
4. Offset losses
If you made a loss in the current or previous year, you may be able to carry it forward or back to reduce your taxable income.
5. Set up a time to pay arrangement
If paying in full will cause hardship, HMRC may allow you to pay in instalments. You can apply online if your bill is under £30,000.
Example: Reducing payments on account
| Scenario | Last year’s tax | This year’s estimated tax | Action | Result |
|---|---|---|---|---|
| Income drops | £4,000 | £2,500 | Request reduction | POA drops from £2,000 to £1,250 |
| Income steady | £4,000 | £4,000 | No change | Payments stay the same |
| Income rises | £4,000 | £5,000 | Keep POA as is | Avoid interest later |
Special considerations for CIS workers
CIS subcontractors often overpay tax during the year because of 20% deductions on gross payments. This means:
- You may be due a refund rather than having to pay extra
- A correct tax return can significantly reduce January payments
How Tax2u can help you reduce January SA payments
At Tax2u, we help:
- Check if your payments on account can be reduced
- Maximise expense claims
- Ensure CIS deductions are correctly offset
- Avoid HMRC penalties or interest
Get your tax return started today – We’ll help you legally reduce what you owe and keep more of your hard-earned money.