North Devon Accounts helps clients understand upcoming tax bills, avoid surprises and plan ahead for HMRC deadlines.
Many Self Assessment taxpayers are caught out by a Payment on Account. It often appears after filing a tax return and can make a tax bill look much higher than expected.
What Is a Payment on Account?
A Payment on Account is an advance payment towards your next Self Assessment tax bill.
HMRC will usually ask for these payments if your tax bill is more than £1,000 and less than 80% of your tax has already been collected through PAYE.
The payments are based on your previous year’s tax bill.
How Does It Work?
Payments on Account are split into two instalments:
- 31 January
- 31 July
Each payment is normally 50% of your previous year’s tax bill.
For example, if your tax bill for 2025/26 is £4,000, HMRC will usually ask for:
- £2,000 on 31 January 2027
- £2,000 on 31 July 2027
Why Is My January Tax Bill So High?
This is where many people get caught out.
On 31 January, you may need to pay both:
- Your tax bill for the previous tax year
- The first Payment on Account for the following year
If your tax bill is £4,000, your January payment could be £6,000 once the first Payment on Account is included.
Can Payments on Account Be Reduced?
Sometimes.
If your profits have fallen and you expect your next tax bill to be lower, you may be able to reduce your Payments on Account.
Care is needed. If the reduction is too large, HMRC may charge interest on any underpaid tax.
How Can You Prepare?
The best approach is to plan ahead.
Keeping accurate records and setting money aside throughout the year can help you avoid unexpected tax bills and manage your cash flow more effectively.
Need Help Understanding Your Tax Bill?
If you’ve received a Self Assessment calculation and are unsure why HMRC is asking for a Payment on Account, we can help.
Contact North Devon Accounts today for clear advice and support with your Self Assessment obligations.
