Reporting on this topic was still developing when we wrote this, and some details come from commentary rather than official documents. Check GOV.UK for the final rules before you act.
How payments on account work today
If your Self Assessment bill is above a threshold, HMRC normally asks for payments on account toward next year’s bill. Each is usually half of last year’s bill, due on 31 January and 31 July, with any balance due the following 31 January. Check GOV.UK for the current rules and exceptions.
Example
Your bill for 2025/26 is £6,000. By 31 January 2027 you pay the £6,000, plus a first payment on account of £3,000 toward 2026/27. On 31 July 2027, another £3,000. If your 2026/27 bill turns out to be £7,000, you pay the £1,000 balance on 31 January 2028 plus the next first payment.
What is reported to be changing
Budget commentary reports that from April 2029 payments on account will move toward more regular in-year payments, possibly monthly. The Office for Budget Responsibility is reported to expect a large effect on self-employed cash balances. Implementation details are still being developed, so do not assume a particular design yet.
How to prepare
- Set aside tax as you earn. Move a fixed share of each payment into a separate savings account.
- Know your number. Estimate profit to date every quarter.
- Use the quarterly updates. They show your position during the year. See MTD quarterly updates in AvrioBooks.
- Reduce payments on account if you expect lower profit, through HMRC, but be careful, since underpaying can lead to interest.
- Forecast cash. See a 13-week forecast.
How AvrioBooks helps
Keep your profit and loss up to date, forecast cash and prepare Making Tax Digital quarterly updates. See Making Tax Digital software.
Frequently asked questions
What is a payment on account?
An advance payment toward next year's Self Assessment bill, normally half of the previous year's bill, due 31 January and 31 July.
Are payments on account changing?
Reform toward more regular in-year payments is reported for April 2029. Details are still being developed.
How can I prepare?
Set aside tax as you earn, check your profit each quarter and forecast your cash.
Can I reduce a payment on account?
Yes, through HMRC if you expect lower profit, but underpaying can lead to interest.
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