31 July Deadline: What Is a Payment on Account and Do You Need to Pay?

If you are self-employed, a sole trader, a landlord, or a higher-rate taxpayer who files a Self Assessment return, there is an important HMRC deadline landing on 31 July 2026 that you need to be aware of: your second payment on account for the 2025/26 tax year.

Many people who are new to Self Assessment are caught off-guard by payments on account. This article explains exactly what they are, how they are calculated, and what you can do if you think you have been asked to pay too much.

What is a payment on account?

Payments on account are advance payments towards your next income tax and Class 4 National Insurance bill. Rather than paying your full tax liability in one lump sum each January, HMRC spreads the cost across two instalments, one in January and one in July.

Each instalment is calculated as half of your previous year's total Self Assessment tax bill. So if your 2024/25 tax bill was £6,000, you would owe two payments of £3,000, one by 31 January 2026 and one by 31 July 2026.

Who has to make payments on account?

Payments on account apply if your last Self Assessment tax bill was more than £1,000 and less than 80% of your tax was collected at source through PAYE. If you are new to Self Assessment or your income recently crossed this threshold, you may be making these payments for the first time.

It is worth noting that payments on account only cover income tax and Class 4 National Insurance. They do not include Capital Gains Tax or student loan repayments, which are settled through the annual balancing payment in January.

What if my income has dropped this year?

This is where many taxpayers can save money. If your income in 2025/26 has been lower than the previous year (perhaps because your business has had a quieter period, or you have worked fewer hours) your actual tax liability will likely be lower than HMRC has assumed.

In this case, you can apply to reduce your payments on account by submitting a claim to HMRC. However, this must be done before the 31 July deadline passes. If you overpay, HMRC will refund the difference when your return is filed, but that may be many months away. Acting now means better cash flow today.

A word of caution: if you reduce your payments and your actual bill turns out to be higher than expected, HMRC will charge interest on the underpayment. It is important to base any reduction on a realistic estimate of your income.

What happens if you miss the deadline?

If your payment does not reach HMRC by 31 July 2026, interest will begin to accrue from the following day. The current HMRC late payment interest rate is calculated at the Bank of England base rate plus 2.5%, so with rates where they are, this is not an insignificant charge. Penalties for persistent non-payment can escalate further.

If you are struggling to pay, HMRC does offer a Time to Pay arrangement in some circumstances. Speaking to your accountant before the deadline, rather than after, gives you the best chance of managing any shortfall without incurring unnecessary charges.

How we can help

Working out what you owe, whether a reduction is justified, and making sure your payment reaches HMRC correctly and on time is exactly the kind of thing your accountant should be helping you with. If you are unsure about your 31 July position, please do not leave it until the last minute.

Get in touch with our South Wales team today and we will work out your payment on account position with you — including whether a reduction applies. Call us on 01443 834047, email info@fooks.co.uk, or use our form to get in touch.

31 July Deadline: What Is a Payment on Account and Do You Need to Pay?

What is a payment on account?

Who has to make payments on account?

What if my income has dropped this year?

What happens if you miss the deadline?

How we can help

Latest News

Is Your Business Making the Most of Its Mid-Year Financial Review?

Making Tax Digital is Here — What South Wales Businesses Need to Know

P11D Deadline Approaching: Everything UK Employers Need to Do Before 6 July

Are You Still Structuring Your Salary and Dividends Efficiently?

Companies House Identity Verification: What UK Directors Need to Do Before November 2026