Self assessment payments on account

What are self assessment payments on account?

Self assessment payments on account are advance payments towards your tax and Class 4 National Insurance bill.

Where payments on account are due, the tax is payable in two instalments on 31 January in the tax year and on 31 July after the tax year rather than in full in a single instalment of 31 January after the tax year.

How much has to be paid?

Payments on account are based on your previous year’s tax liability so if profits are increasing it's likely you won't pay enough to cover your current year tax liability. But if profits have reduced you may pay too much.

Any balancing payment must be made by 31 January after the end of the tax year. But if you have paid too much, the excess will normally be set against the next year’s payments on account or refunded if none are due.

When must payments on account be made?

Payments on account must be made where tax and Class 4 National Insurance for the previous tax year was £1,000 or more, unless at least 80% of the tax owed has been deducted at source, for example under PAYE.

Payments on account are not required when tax and Class 4 National Insurance bill for the previous year was less than £1,000.

Calculating the payments on account

Each payment on account is 50% of the previous year’s tax and Class 4 National Insurance liability.

Class 2 National Insurance contributions are not taken into account in calculating the payments on account and must be paid in full by 31 January after the end of the tax year.

Reduce payments on account

If the taxpayer knows that income in the current year will be less than the previous year, they can ask HMRC to reduce the payments on account. However, interest is charged on the shortfall if the payments are reduced below the level they should be.