Self Assessment Payment on Account Calculator

Payments on account are advance Self Assessment payments towards the following tax year’s bill. Rather than waiting until the whole of next year’s tax is due in one go, HMRC asks for it in two instalments — each normally half of the tax you owed for the year just filed.

When next year’s return is submitted, the payments you have already made are credited against the bill. If you owe more, the difference is a balancing payment. If you owe less, the overpayment is normally refunded or credited.

The first January in which payments on account apply usually asks for two things at once: the full tax bill for the year you have just filed, plus the first payment on account of 50% towards the following year.

On a £3,000 bill, that means £3,000 plus £1,500 — around £4,500 in one January payment, with a further £1,500 in July. It looks like one and a half years of tax because, effectively, it is: one completed year and half of the next paid in advance.

There are two common reasons payments on account do not apply. The first is the under-£1,000 rule: if the amount due through Self Assessment is less than £1,000, HMRC does not normally ask for advance payments.

The second is the 80% rule: if more than 80% of your total tax for the year was already collected at source — most often through PAYE on employment income — payments on account are not normally required either.

If you expect next year’s tax to be lower — perhaps because you have taken on employment, wound a business down, or had a quieter year — HMRC allows eligible taxpayers to apply to reduce their payments on account.

Be careful, though. If you reduce them too far and your final liability turns out to be higher, HMRC may charge interest on the difference. Reduce them because you genuinely expect a lower bill, not to delay paying tax.