Self-Assessment Payments on Account

Ah yes, those extra amounts that HMRC put on your self-assessment every year. They’re annoying, we sympathise, but do you understand how they work?

Why, why, why?!  “I’m paying enough tax already” I’m sure you’re saying, why are they charging me more? So, once your tax bill via self-assessment goes above £1,000 – you have to start paying in advance for next year’s tax bill. HMRC call this making ‘payments on account’.

How much are the payments?  HMRC take your current year tax bill, and they make you pay 50% of it by 31st January, and 50% of it by 31 July. These are your two payments on account towards the next tax year. FYI, this would not include anything for student loan repayments, or amounts you owe for capital gains.

What if my actual bill is more?  When you then submit your self-assessment, if your actual tax bill was more than the two payments on account you have made – you will have to pay the difference via a ‘balancing payment’. If it’s less, they will pay the difference back to you (they will spend ages doing this – be warned ????)

Worked Example:  So, Bob had a tax bill of £2,000 in his 19/20 return. When Bob submitted his 19/20 return, they would have asked him to make two payments on account in Jan and July – each for £1,000. These are his advance payments for 20/21.

Then Bob submitted his actual return for 20/21 – his tax bill was £3,000. He has made payments on account of £2,000 already, so he has a balancing payment to make of £1,000 for that year. He’ll then need to make the two payments on account for £1,500 each for 21/22. Clear as mud?

Is this logical?  Sadly, it is when you think about it. HMRC are just trying to get you to pay your tax in real time. The tax year runs April – April, and they want to pay your estimated tax bill 50% in January and 50% in July. This is more in line with the actual tax year, compared to paying the while bill the following January.

But I know my bill is going to be less next year?  If this is the case, fear not – you can manually adjust your payments on account down via your government gateway login.

If you’ve got any questions on this just give us a shout on

Elspeth Vincent