Payment on Account for UK Self-Employed Explained
The short answer
If your Self Assessment tax bill is over £1,000, HMRC spreads it across two advance payments: 50% on 31 January and 50% on 31 July, each based on last year's bill. They cover income tax and Class 4 National Insurance. From 6 April 2026, Making Tax Digital for Income Tax adds quarterly digital records once qualifying income passes £50,000.
What is a payment on account?
A payment on account is HMRC's way of collecting part of your tax bill before the tax year ends, so the amount is not one big lump sum in January. It is not an extra tax on top of what you owe. It is an advance against the same income tax and Class 4 National Insurance that your Self Assessment return produces.
Who has to make payments on account?
You pay on account when your previous year's Self Assessment tax bill comes to more than £1,000, after any tax already taken at source. If more than 80% of your tax was collected through PAYE or another deduction, HMRC will not ask for payments on account. The gov.uk guide to your Self Assessment bill sets out the full conditions.
How is a payment on account calculated?
Each instalment is half of your previous year's tax bill, not half of this year's. The bill used is income tax plus Class 4 National Insurance, and it excludes capital gains tax, student loan repayments and Class 2 National Insurance.
Instalment | Due date | Amount if tax bill is £2,000 |
|---|---|---|
First payment on account | 31 January 2026 | £1,000 (50%) |
Second payment on account | 31 July 2026 | £1,000 (50%) |
So a self-employed plumber with a £3,000 bill for 2025/26 pays £1,500 on 31 January 2026 and £1,500 on 31 July 2026. Anything left after those two instalments becomes a balancing payment with the return in the following January. Use the pricing page to see where the free plan fits before you start tracking the numbers.
Many UK tradespeople also find it helpful to review self assessment tax guide for tradespeople at this stage.
Does a payment on account include National Insurance?
Class 4 National Insurance is included when your self-employed profits are above the Class 4 lower limit of £12,570. For 2025/26 the Class 4 rate is 6% on profits between £12,570 and £50,270, and 2% on profits above that. That is why a growing business can see income tax and National Insurance sitting in the same instalment.
Can I reduce my payments on account?
Yes. If your income this year is likely to be lower than last year, you can ask HMRC to reduce your payments on account. The catch is that if you reduce them too far and end up owing more, HMRC charges interest on the shortfall. A reasonable estimate beats an optimistic one, so keep your records current before you submit it.
If you are sorting this alongside other compliance work, read self-employed tax deadlines.
How does payment on account connect to Making Tax Digital?
Payments on account are settled through your return; Making Tax Digital changes how you keep the records that sit behind it. From 6 April 2026, sole traders and landlords with qualifying income over £50,000 must send quarterly digital updates and keep digital records. That threshold drops to £30,000 from 2027 and £20,000 from 2028. Qualifying income is turnover before expenses, so use the HMRC checker rather than a guess (gov.uk MTD guidance).
InvoiceAdept keeps your invoicing records digital so the numbers behind the return are ready as you go. See what Making Tax Digital means for tradespeople and how invoicing features support compliant records.
What other tax deadlines should a tradesperson budget for?
Payments on account sit alongside the rest of the year, and the thresholds matter. A sole trader must register for VAT once taxable turnover passes £90,000 in a rolling 12 months (gov.uk VAT registration). Builders and subcontractors working under the Construction Industry Scheme face CIS deductions of 20% if registered or 30% if not (gov.uk Construction Industry Scheme). See how CIS appears on a subcontractor invoice.
Related: see National Insurance for the self-employed for practical next steps.
FAQs
What is a payment on account in the UK?
It is an advance payment of income tax and Class 4 National Insurance that HMRC collects before the tax year ends, so you are not left with a single large bill in January.
When are payments on account due?
Two are due each year: the first on 31 January during the tax year and the second on 31 July after it. Each is half of the previous year's tax bill.
Will I pay on account if my tax bill is under £1,000?
No. You only get payments on account when your Self Assessment tax bill is more than £1,000 after tax deducted at source. If more than 80% of your tax is already collected at source, you do not pay on account either.
Worth pairing this with our guide to allowable expenses for the self-employed.
How do I reduce my payments on account?
Contact HMRC or use your online Self Assessment account with an estimate of this year's income. If you underestimate, HMRC charges interest on the difference at the following January.
Do I include capital gains tax in a payment on account?
No. Payments on account cover income tax and Class 4 National Insurance only. Capital gains tax, student loan repayments and Class 2 National Insurance are settled separately on your return.
The bottom line
Payments on account are a timing tool, not a penalty: two instalments of half of last year's bill, due 31 January and 31 July. Budget for them, keep accurate records so you can reduce them safely if income falls, and get your books MTD-ready from the first invoice. Start invoicing free in 30 seconds →
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