What Are Payments on Account for Self Assessment in 2026/27?

Q: I am employed and also self-employed - will I have to make payments on account?

Only if your Self Assessment bill is u00a31,000 or more and less than 80% of your total tax was collected at source. Many people with a salary and a modest side income stay under the threshold because PAYE covers most of their tax, but once self-employed profits grow, payments on account usually follow.

Accounting· October 26, 2026 · 6 min read

Payments on account are advance payments towards your next Self Assessment tax bill. HMRC asks for two each year, due by midnight on 31 January and 31 July, and each one is normally half of your previous year’s income tax and Class 4 National Insurance bill. You must make them unless your last Self Assessment bill was under £1,000, or you have already paid more than 80% of the tax you owe at source, for example through a PAYE tax code.

The system catches many sole traders, landlords and company directors with untaxed income off guard, because the first time it applies you effectively pay eighteen months of tax in one go. This guide explains how payments on account work for the 2026/27 tax year, with a worked example using HMRC’s published rates, and what to do if you think your payments are too high.

How do payments on account actually work?

When you file a Self Assessment return, HMRC does not just collect the tax you owe for the year you are reporting. If your bill is large enough, it also assumes next year will look much the same and asks you to pay towards it in advance, in two equal instalments.

Each payment on account is 50% of your previous year’s income tax and Class 4 National Insurance liability.
The first instalment is due by 31 January, the same day as any balancing payment for the year just filed.
The second instalment is due by 31 July.
If your actual bill turns out higher than the two instalments, you settle the difference as a balancing payment the following 31 January. If it is lower, HMRC repays or offsets the overpayment.

Payments on account cover income tax and Class 4 National Insurance only. Capital Gains Tax and student loan repayments are never collected through payments on account; they are settled with your balancing payment instead.

Who has to make payments on account in 2026/27?

You will be asked to make payments on account if both of the following were true for the last tax year you filed:

Your Self Assessment bill was £1,000 or more; and
Less than 80% of the total tax you owed was deducted at source, for example through PAYE on a salary or pension.

This is why an employee with a small side income rarely makes payments on account, while a full-time sole trader or a landlord with no PAYE income almost always does once their profits pass a modest level. On 2026/27 rates, a self-employed person needs only around £17,500 of profit before their combined income tax and Class 4 bill passes the £1,000 trigger.

Which dates matter for 2026/27?

If you are filing your 2025/26 return now

Your online return for the year ended 5 April 2026 is due by 31 January 2027. On the same day you must pay any balance owed for 2025/26 plus your first payment on account for 2026/27. The second 2026/27 payment on account follows on 31 July 2027, and any 2026/27 balancing payment is due by 31 January 2028.

If 2026/27 is your first year with a large bill

You will feel the full effect on 31 January 2028: the whole of your 2026/27 tax, plus half of it again as your first payment on account for 2027/28. Budgeting for that date early is the single best way to avoid a January cash-flow crisis. Our free UK tax deadlines calendar lists every date in one place.

Worked example: sole trader with £40,000 profit in 2026/27

Priya starts working for herself in April 2026 and makes a taxable profit of £40,000 in the 2026/27 tax year, with no other income. Using HMRC’s 2026/27 rates:

Income tax: £40,000 minus the £12,570 personal allowance leaves £27,430 taxable at the 20% basic rate = £5,486.00
Class 4 National Insurance: 6% on profits between £12,570 and £50,270, so 6% of £27,430 = £1,645.80
Total 2026/27 bill: £7,131.80

Because the bill is over £1,000 and none of it was deducted at source, payments on account apply for the following year. By 31 January 2028 Priya must pay £7,131.80 for 2026/27 plus a first payment on account of £3,565.90 towards 2027/28 — £10,697.70 in total — followed by a second £3,565.90 instalment by 31 July 2028. From then on, the instalments roll forward each year and the January shock largely disappears. You can sense-check your own numbers with our take-home pay calculator for 2026/27.

Can I reduce my payments on account?

Yes. If you expect your income to fall — you have lost a big client, taken time off, or incurred unusually high costs — you can ask HMRC to reduce your payments on account. You can do this online through your HMRC account or by posting form SA303. The official guidance is on GOV.UK’s payments on account page.

Be careful not to reduce them too far. If your final bill comes in higher than your reduced payments, HMRC charges late payment interest on the shortfall, backdated to the original due dates. If you genuinely cannot predict your profits, a mid-year review with an accountant is usually cheaper than the interest. Our personal tax advisors in London handle reduction claims and in-year estimates routinely, and our sole trader and partnership accountants can build the January and July payments into a simple monthly savings plan.

Practical tips for managing payments on account

Set money aside monthly. For most basic-rate sole traders, 25% to 30% of profit comfortably covers income tax, Class 4 and the payments-on-account cycle.
File early. Filing your return in spring or summer does not change the payment deadlines, but it tells you the exact January figure months in advance.
Check your statement. Payments on account are easy to miss on HMRC statements, and missing the 31 July instalment quietly accrues interest.
Review before 31 July. If profits have clearly dropped, a reduction claim before the second instalment improves cash flow immediately.

Frequently asked questions

Do payments on account include student loan repayments or Capital Gains Tax?

No. Payments on account are calculated only on your income tax and Class 4 National Insurance. Student loan repayments and any Capital Gains Tax are collected with your balancing payment on 31 January, so remember to budget for them separately.

What happens if my income drops after I have made payments on account?

If your final return shows you have overpaid, HMRC will refund the difference or set it against your next bill. If you know in advance that profits are falling, you can apply to reduce the payments before they are due, online or using form SA303, rather than waiting for a refund.

I am employed and also self-employed — will I have to make payments on account?

Only if your Self Assessment bill is £1,000 or more and less than 80% of your total tax was collected at source. Many people with a salary and a modest side income stay under the threshold because PAYE covers most of their tax, but once self-employed profits grow, payments on account usually follow.

Written by the Accountactical Team — ACCA-Approved Accountants, London.

This article is general information for UK taxpayers and not formal tax advice; your circumstances may differ, so please speak to an accountant before acting on it.