Payments on Account 2026/27: Dates, 150% First Bill, SA303
Payments on account are advance payments toward next year's tax bill, paid in two equal instalments — one in January and one in July. They exist because HMRC collects income tax in arrears. For sole traders with a rising income, they can turn a manageable annual tax bill into a significantly larger January demand than expected.
Written and reviewed by James Whitfield · Last reviewed 4 November 2026 · Checked against 2026/27 HMRC rates · Editorial standards · Methodology
Contents ▾
- 1. Worked example: the first-year January squeeze
- 2. How payments on account work
- 3. Why the first year often feels sharp
- 4. Key dates and what they mean
- 5. When your profit grows: the January after a bigger year
- 6. Applying to reduce payments on account
- 7. When payments on account stop
- 8. Using the calculator to prepare
Payments on account are advance payments towards next year's Self Assessment bill. If your bill is over £1,000 (and less than 80% was collected through PAYE), HMRC asks for two instalments — due 31 January and 31 July — each 50% of the previous year's Income Tax and Class 4 NI. The first year they apply, your 31 January payment can feel like roughly 150% of the tax, because you settle the year's balancing payment and the first payment on account together.
- →Due dates: 31 January and 31 July each year.
- →Each instalment = 50% of last year's Income Tax + Class 4 NI.
- →They only apply if your Self Assessment bill tops £1,000.
- →Expecting lower income? Ask HMRC to reduce them using form SA303.
Related: Plan your 31 January and 31 July payments · Your first tax return as a sole trader · Tax set-aside calculator · MTD quarterly updates · Worked 31 January 2027 bill · Missed a payment on account?
Enter your yearly profit (income minus allowable expenses). We work out your bill and whether payments on account apply, using the same engine as our full calculator.
2026/27 rates. Income Tax and Class 4 NI only (no student loan or pension). Estimates for planning only, not tax advice.
- Payments on account are advance instalments toward next year's tax, due 31 January and 31 July.1
- Each instalment is 50% of last year's Income Tax and Class 4 NI combined.1
- They only start once your Self Assessment bill tops £1,000 and under 80% was taxed at source.1
- The first January they apply can feel like about 150% of your annual tax bill.1
- Expecting a quieter year? Reduce them with form SA303 — but under-estimate and HMRC charges interest.1
Free check · 2026/27
Work out your payments on account, with dates
See your 2026/27 bill, every payment with its date and amount, and what to set aside each month.
Worked example: the first-year January squeeze
The moment that catches people out is the first January that payments on account apply. Say your 2026/27 Self Assessment bill comes to £8,000. Because it is your first year over the threshold, there was no advance already paid — so January bundles the whole bill with the first advance for the next year.
| 2026/27 tax bill (Income Tax + Class 4 NI) | £8,000 |
| Balancing payment for 2026/27, due 31 Jan 2028 | £8,000 |
| First payment on account for 2027/28 (50%) | £4,000 |
| Total due 31 January 2028 | £12,000 |
| Second payment on account, due 31 July 2028 (50%) | £4,000 |
This is not a penalty or a glitch — it is simply how HMRC moves you onto paying broadly in step with earning. But it is the single most common cash-flow shock for a growing sole trader, so it is worth setting aside for the advance as well as the bill itself.
How payments on account work
When you file your Self Assessment return for a tax year, if your total tax liability exceeds £1,000 and less than 80% was collected at source through PAYE, HMRC requires you to make two payments on account for the following year. Each payment is 50% of your current year's bill.1
Example: your 2026/27 Self Assessment bill is £8,000 and you already made payments on account of £3,000 each (31 January and 31 July 2027) based on the year before. On 31 January 2028 you pay the £2,000 balance for 2026/27 plus the first payment on account for 2027/28 (£4,000, being 50% of £8,000): £6,000 in total. On 31 July 2028 you pay the second £4,000.
In the year a sole trader's income grows significantly, this means January can require paying off the prior year's remaining balance and a large on-account amount simultaneously — potentially around 150% of the annual tax bill in one month.
Why the first year often feels sharp
If your early self-employment income was modest or below the £1,000 threshold for on-account payments, you may have been paying no January or July instalments at all. The first year your bill exceeds the threshold — often when income grows as a business matures — you move from a simple annual payment to a three-part demand in one tax cycle.
This is not a penalty or a system error. It is a structural feature of how Self Assessment is designed. But it catches a significant number of people by surprise because the demand is larger than the underlying annual bill alone suggests.
The monthly set-aside figure shown in this calculator is calibrated to the annual bill, which covers the underlying tax. If you know payments on account will apply, setting aside slightly more than the calculator suggests — or simply accumulating twelve months of reserve before touching the account — reduces the January shock.
Key dates and what they mean
31 January: file your Self Assessment return for the previous tax year; pay the remaining balance for that year; and pay the first payment on account for the current tax year (each worth 50% of the prior year's bill).
31 July: second payment on account for the current tax year.
If your income for the current year will be lower than the previous year, you can apply to reduce your payments on account using HMRC's SA303 form. This avoids over-paying, but if your actual income turns out higher than estimated, HMRC will charge interest on the difference.
Late payments attract interest from the day after the due date. A balancing payment still unpaid 30 days after it is due also attracts a late payment penalty; payments on account themselves only carry interest. If you cannot pay on time, contacting HMRC to discuss a Time to Pay arrangement before the deadline is always better than ignoring it.
When your profit grows: the January after a bigger year
Payments on account are based on last year's bill, so a year of growth leaves them short. Say your 2025/26 bill was £6,000. Your payments on account for 2026/27 are then £3,000 on 31 January 2027 and £3,000 on 31 July 2027. If your 2026/27 bill turns out to be £8,000, those advances fall £2,000 short. On 31 January 2028 you pay the £2,000 balancing payment and the first payment on account for 2027/28, which is half of £8,000.1
| 2025/26 tax bill | £6,000 |
| Paid on account for 2026/27 (31 Jan and 31 Jul 2027) | £6,000 |
| 2026/27 tax bill (profit grew) | £8,000 |
| Balancing payment for 2026/27, due 31 Jan 2028 | £2,000 |
| First payment on account for 2027/28 (50% of £8,000) | £4,000 |
| Total due 31 January 2028 | £6,000 |
| Second payment on account, due 31 July 2028 | £4,000 |
Applying to reduce payments on account
If you expect this year's bill to be lower than last year's, because of less work, a planned break or a change in the business, you can ask HMRC to reduce your payments on account, online through your HMRC account or on form SA303.1
The reduction rests on your own estimate of this year's bill. If the real bill turns out higher, HMRC charges interest on the difference between what you paid on account and what you should have paid, from the original due dates. So reduce them when your figures support it, and keep a note of how you worked the estimate out.
When payments on account stop
No payments on account are due for a year if your last bill was under £1,000, or if more than 80% of your tax was collected at source, for example through PAYE.1 If your self-employed income falls sharply or you go back to employment, they can drop to nil.
HMRC sets them from your last return, so they do not stop by themselves: file the return that shows the lower bill, or apply to reduce them. You still have to file a return each year until HMRC agrees you no longer need to.
Using the calculator to prepare
The monthly set-aside figure shown here covers the estimated annual income tax and Class 4 NI bill. If you reserve this consistently into a separate account, you should have enough to cover the January payment — including the on-account element — without a cashflow crisis.
Use the quarterly reserve figure as a checkpoint. At the end of each quarter, compare the amount sitting in your tax reserve against the cumulative set-aside target. A gap means income has grown, expenses have been under-estimated or the reserve discipline has slipped.
For the year in which on-account payments first apply, consider reserving modestly more than the calculator suggests. Once the system is established and your income is relatively stable, the on-account cycle becomes predictable and manageable.
Frequently asked questions
When are payments on account due?+
The first payment on account is due on 31 January and the second on 31 July each year. Each is 50% of your previous year's Self Assessment tax bill.
What is the threshold for payments on account?+
Payments on account apply when your total Self Assessment tax liability exceeds £1,000 and less than 80% of it was collected at source through PAYE. If your bill is £1,000 or less, no payments on account are required.
Can I reduce my payments on account?+
Yes, if you expect income to be lower in the current year than in the previous one. Use form SA303 to request a reduction. If your actual income is higher than you estimated, HMRC charges interest on any underpaid amount.
Does this calculator factor in payments on account?+
The calculator shows a monthly set-aside and quarterly reserve based on the estimated annual tax bill. It does not automatically add the on-account element, but building the annual reserve gives you the cash needed to cover both the balancing payment and the on-account instalments.
What happens if I miss a payment?+
Interest runs from the day after the due date on anything paid late, including payments on account. Late payment penalties apply to the balancing payment, not to payments on account. If you cannot pay, contact HMRC as early as possible to arrange a Time to Pay agreement.
Do I have to make payments on account every year?+
Only for years when your last Self Assessment bill was £1,000 or more and less than 80% of your tax was collected at source, such as through PAYE. If your bill drops below £1,000, no payments on account are due for the following year.
What happens if I overpay through payments on account?+
HMRC credits the overpayment to your Self Assessment account once your return is processed. You can ask for it to be repaid to your bank account or leave it as a credit towards your next bill.
Sources & references
The rates, thresholds and rules in this guide are drawn from the official HMRC and GOV.UK sources below, using the confirmed 2026/27 figures. Each link opens the relevant official page in a new tab.
- Understand your Self Assessment tax bill: payments on account www.gov.uk/understand-self-assessment-bill/payments-on-account
- Self Assessment tax returns www.gov.uk/self-assessment-tax-returns
Estimate your sole trader tax
The sole trader tax calculator turns this guidance into a concrete monthly take-home and tax reserve estimate, based on 2026/27 HMRC rates. Enter taxable profit — not turnover.