Payments on account are advance payments you make twice a year towards your Self Assessment tax bill. HMRC estimate how much tax you owe for the upcoming year based on your previous year's tax bill.
You pay this estimate over two instalment dates for the purpose of spreading out your tax payments throughout the year.
Each payment is half your previous year's tax bill. Payments are due by midnight on 31 January and 31 July. If you still have tax to pay after you've made your payments on account, you must make a 'balancing payment' by midnight on 31 January the following year.
EXAMPLE
- - Your bill for the 2022 to 2023 tax year is £3,000.
- You made 2 payments of £900 each (£1,800 in total) on account towards this bill in 2023.
- The total tax to pay by midnight on 31 January 2024 is £2,700.
- This includes: your 'balancing payment' of £1,200 for the 2022 to 2023 tax year (£3,000 minus £1,800) the first payment on account of £1,500 (half your 2022 to 2023 tax bill) towards your 2023 to 2024 tax bill.
- - You then make a second payment on account of £1,500 on 31 July 2024.
- **Payments on account do not include anything you owe for capital gains or student loans (if you're self-employed) - you'll pay those in your 'balancing payment'.