If you complete a Self Assessment tax return, there's a good chance a payment lands in your diary on 31 July — and this year that means midnight on Friday 31 July 2026. It's called your second payment on account, and it catches a lot of people off guard because there's no new tax return behind it and no fresh bill in the post. You simply owe it. Here's what it is, who has to pay, how to work out the figure, and what to do if the amount looks wrong.
What a payment on account actually is
A payment on account is an advance instalment towards your next tax bill. HMRC asks many taxpayers to pay their Self Assessment liability in two chunks rather than one, to spread the cost and to collect tax closer to the point you earn it. Each instalment is usually half of your previous year's tax bill.
So if your 2024/25 tax bill came to £3,000, HMRC will typically ask for £1,500 by 31 January 2026 and a further £1,500 by 31 July 2026. Those two payments are estimates based on last year's figures, on the assumption your income will be broadly similar again.
The important thing to understand is that the July payment isn't an extra tax. It's money that reduces what you'll owe when you file your 2025/26 return. Once that return is submitted, HMRC compares what you've paid on account against your actual liability and either asks for a balancing payment or issues a refund.
Do you have to make one?
Payments on account don't apply to everyone. You're asked to make them only if both of these were true for the previous tax year:
- Your Self Assessment tax bill was £1,000 or more, and
- Less than 80% of the tax you owed was already collected at source — for example, through PAYE on a salary or through tax deducted before you were paid.
If your last bill was under £1,000, or the bulk of your tax is already deducted before it reaches you, you generally won't be in the payments-on-account system at all. That's why many people with a small side income alongside a main job never see a July demand, while full-time sole traders and freelancers almost always do.
If you're newly self-employed, the system can feel harsh in your first full year: you can end up settling your first tax bill and making your first payment on account at the same January deadline. Understanding this early makes the cash-flow planning far less painful, and it's one of the things we talk through with new sole traders and freelancers when they come on board.
The dates to keep in your diary
For the current cycle, the key Self Assessment deadlines are:
- 31 January 2026 — first payment on account for 2025/26, alongside any balancing payment for 2024/25
- 31 July 2026 — second payment on account for 2025/26
- 31 January 2027 — balancing payment for 2025/26, plus the first payment on account for 2026/27
That January date is the one that does the heavy lifting, because it bundles several things together. The July payment is simpler — it's a single instalment — but it's easy to forget precisely because nothing new triggers it.
What happens if you pay late
If the 31 July payment isn't made on time, HMRC charges late-payment interest on the outstanding amount. Interest is set by a statutory formula — the Bank of England base rate plus four percentage points — and it accrues daily from the due date until you pay. There's no separate late-payment penalty on the July payment on account itself, but interest alone can mount up quickly on a few thousand pounds, so it's worth clearing it promptly even if funds are tight.
If you genuinely can't pay by the deadline, don't simply ignore it. HMRC offers a Time to Pay arrangement that lets many taxpayers spread the cost over monthly instalments. Interest still applies, but arranging a plan before the deadline is far better than letting the debt sit and grow.
Can you reduce the payment?
Yes — and this is where good advice pays for itself. Because payments on account are based on last year's figures, they can be too high if your income has fallen. If you've had a quieter year, lost a major client, or moved from self-employment into a salaried role, paying an instalment sized for last year's profits means handing HMRC money you'll only have to reclaim later.
You can make a formal claim to reduce your payments on account through your HMRC online account or your Self Assessment return. But there's a catch worth flagging: if you reduce the payments too far and your actual bill turns out higher, HMRC charges interest on the shortfall — as though the full amount had been due all along. The goal is an honest, well-judged estimate of this year's profits, not wishful thinking.
Equally, if your income has risen, the payments on account won't cover your eventual bill, and you'll face a larger balancing payment next January. Knowing that in advance lets you set the money aside now rather than scrambling later.
A calmer way to handle it
The reason payments on account cause stress is rarely the tax itself — it's the surprise. A demand you didn't expect, sized on figures you'd half-forgotten, arriving in the middle of summer. With your accounts kept up to date and your likely liability estimated well ahead of time, the July payment becomes a line you've already planned for rather than a shock.
This is exactly the kind of forward planning we build in for our sole traders, partnerships and limited company clients — so you always know what's coming, when, and why. If you'd like your payments on account checked before 31 July, or you think this year's figure should be reduced, we can review it with you.
Get an instant quote or book a call and we'll make sure your July payment is right — no surprises, no overpaying.
This article is general guidance, not personal tax advice. Your circumstances may differ, so please get in touch for advice tailored to you.