Who Needs to Pay?
For the 2025/26 tax year, individuals registered for Self Assessment—typically the self-employed or those with significant untaxed income—must make payments on account if their previous year’s tax bill exceeded £1,000 and less than 80% of their tax was collected at source (such as via PAYE). Notably, from April 6, 2025, the threshold for mandatory Self Assessment tax returns rises to £3,000, exempting many with modest additional incomes.
What Are Payments on Account?
Payments on account are advance payments towards your income tax and Class 4 National Insurance for the current tax year. There are two instalments each year:
- First payment on account: Due by January 31 (alongside any balancing payment for the previous tax year).
- Second payment on account: Due by July 31.
Each payment is typically 50% of your previous year’s tax bill (excluding student loan repayments and capital gains tax).
Example Calculation for 2025/26
Suppose your tax bill for 2024/25 is £2,000. For the 2025/26 tax year, you will make:
- £1,000 by January 31, 2026 (first payment on account)
- £1,000 by July 31, 2026 (second payment on account)
If your actual 2025/26 tax bill is higher than £2,000, you’ll pay the difference (the “balancing payment”) by January 31, 2027.
Key Deadlines for 2025 and 2026
| Payment Type | Due Date | Amount |
|---|---|---|
| First Payment on Account | 31 January 2026 | 50% of previous year’s tax bill |
| Second Payment on Account | 31 July 2026 | 50% of previous year’s tax bill |
| Balancing Payment (if needed) | 31 January 2027 | Any remaining tax owed for 2025/26 |
How to Pay
You can pay your Self Assessment tax bill via:
- Online banking or the HMRC app
- Debit or corporate credit card online
- Bank or building society (with a paying-in slip)
- Bacs, Direct Debit, or cheque (allow extra time for processing)
If the deadline falls on a weekend or bank holiday, ensure your payment arrives by the last working day before, unless using Faster Payments or a debit/credit card.
What If You Can’t Pay?
While HMRC does not charge penalties for late payments on account, interest will accrue on any overdue amount. From April 6, 2025, HMRC’s official rate of interest increases to 3.75% per annum, and this rate is subject to quarterly review. If you’re struggling to pay, contact HMRC promptly to discuss payment options or arrange installments.
Can You Reduce Your Payment?
If you expect your income for 2025/26 to be lower than the previous year, you may apply to reduce your payments on account. However, if you reduce them too much and underpay, you’ll be charged interest on the shortfall.
Key Changes for 2025/26
- Self Assessment threshold: Now £3,000, exempting more low-income individuals from filing.
- Mandatory reporting: New businesses or those ceasing must report exact commencement/cessation dates in their tax returns.
- Personal allowance and tax bands: The personal allowance remains at £12,570, with unchanged tax bands for 2025/26.
Essential Tips for July 31
- Review your Self Assessment statement or online account for the amount due.
- Plan your finances to meet deadlines and avoid interest charges.
- Consider whether you can legitimately reduce your payment on account if your circumstances have changed.
- Contact HMRC early if you anticipate difficulty paying on time.
By staying informed and preparing in advance, you can manage your tax obligations efficiently and avoid unnecessary charges for the 2025/26 tax year.