Two instalments, each usually half of last year's tax
HMRC does not wait for you to report a year before collecting it. It estimates what your next bill will be from your earnings, usually the previous year's amount, and asks for half of it on each of the two payment dates. Class 4 National Insurance is included in the calculation if you are self-employed, so the instalment is not Income Tax alone.
The two dates are fixed and the amount is not: each payment is usually half of last year's tax, so the figures can change once your income does.
| Payment due | What it covers |
|---|---|
| 31 January | The balancing payment for the return you have just filed, plus your first payment on account for the year ahead. |
| 31 July | Your second payment on account for the same year. |
Both dates are midnight deadlines. If you are filing for the first time, you pay the whole tax calculation plus the first payment on account by 31 January, which is why a first bill often comes out at roughly one and a half times the year's tax.
When you do not have to make them
Payments on account are not automatic. You do not have to make them if either of these is true:
- the tax you owed last year was less than £1,000
- more than 80% of last year's tax was collected outside Self Assessment, for example through your tax code or as bank-deducted savings interest
Either condition on its own removes the obligation. Both are tested against last year's figures rather than a forecast, so the answer can differ from one year to the next.
The balancing payment is the rest of it
The balancing payment is your total tax for the year minus the payments on account you have already made. It is due by midnight on 31 January the following year, and it includes anything you owe for capital gains or student loans if you are self-employed.
You can see what has been charged and what has been paid in your online account, under your latest Self Assessment return, in 'View statements'. If you file on paper, the same information comes on your Self Assessment Statement.
A balancing payment can go either way. If your income dropped, it may be a refund, and if it rose, it is the gap between what you paid in advance and what you actually owe.
Reducing your payments on account
If you know your tax this year will be lower than last year, you can ask HMRC to cut the instalments. You can do it online by opening your latest return and choosing 'Reduce payments on account', or by post using form SA303, Claim to reduce payments on account. Either way you have to state the amount you expect to make.
If you miss a payment
An instalment that goes unpaid does not just carry interest. Late payment penalties apply to the Self Assessment bill, at each of these points:
| Point reached | Late payment penalty |
|---|---|
| 30 days | 5% of the tax unpaid |
| 6 months | A further 5% of the tax unpaid |
| 12 months | A further 5% of the tax unpaid |
That is up to 15% of the unpaid tax in penalties, before interest is added on top. If you cannot pay, contacting HMRC early is still the cheapest move: penalties and interest keep running while a bill sits unpaid and ignored.