You filed your tax return back in January. You paid what you owed. You breathed out. And now, six months later, HMRC wants another payment by 31 July, and you’d half forgotten it was coming.
If that’s you, you’re in good company. The July payment catches out sole traders, landlords, freelancers and company directors every single year. It lands in the middle of summer, often when cash is already tied up in VAT, wages or a quiet trading month. And because it doesn’t come with a fresh tax return, it doesn’t quite feel like a real bill.
Here’s the thing, though, it is real, and it’s due by midnight on 31 July.
So what actually is a payment on account?
It’s an advance payment towards next year’s tax bill. Instead of paying everything in one lump each January, HMRC asks you to pay in two instalments — one on 31 January, one on 31 July. Each one is normally half of the tax you owed the year before.
So if last year’s bill was £6,000, you’d have paid £3,000 in January, and you’ll pay another £3,000 in July. You’ll sort out any difference when you file your next return.
The key point: it’s not an extra tax. It’s the same tax you were always going to pay, just collected earlier.
Does this affect me?
You’ll have payments on account to make unless one of these applies:
- The tax you owed last year was less than £1,000, or
- You paid more than 80% of last year’s tax at source (for example, through your tax code or because your bank had already taken tax off your savings interest).
That second one is why a lot of employed people never see a payment on account, but company directors taking dividends and self-employed people usually do.
One useful thing to know: payments on account cover income tax and Class 4 National Insurance. They don’t include capital gains tax, so if you sold a property or some shares last year, that part is settled separately in January.
What if my income has dropped?
This is where people overpay. HMRC works out your July payment from last year’s figures, so it assumes you’re earning the same again. If you’ve had a quieter year, changed direction, or taken time off, you might be handing over more than you’ll actually owe and then waiting months to get it back.
You can ask HMRC to reduce your payments on account, either online or by post. But there’s a catch worth taking seriously: if you cut it too far and end up owing more than you estimated, HMRC charges interest on the shortfall. So it’s worth basing any reduction on real figures, not hope.
What should I do before 31 July?
A few simple things:
- Check what you owe. Sign in to your HMRC online account or the app and look at your latest statement, the figure’s there waiting for you.
- Pay it, or plan it. You can pay through the app or on GOV.UK. If the full amount is a stretch, HMRC lets you set up a payment plan to spread the cost.
- Don’t just ignore it. Late payments attract interest, and HMRC’s rate has been sitting at 7.75% (the rate applying from 9 January 2026, it does move with the Bank of England base rate, so check the current figure). Missing the deadline is an expensive way to buy yourself a few weeks.
- If your income has dropped, get the numbers straight before deciding whether to reduce.
A gentler summer
Payments on account aren’t a trap; they’re just HMRC spreading your bill across the year. The stress only really comes from being surprised by them. Once you know the July payment is part of the rhythm, it’s much easier to set money aside and take the sting out of it.
If you’re not sure whether yours is right, or whether you could reduce it, get in touch and we’ll go through it with you in plain English. Better to check now than guess.