24 February 2026 · 5 min read · Bruce Thomas
You file your first tax return, expect a bill of a certain size, and HMRC asks for half as much again. Nothing has gone wrong — you have hit payments on account.
How the system works
Once your Self Assessment liability passes a threshold and enough of your tax is not collected at source, HMRC starts asking you to pay next year's tax in two instalments in advance, each based on half of last year's bill.
So the January payment can be last year's balancing amount plus the first instalment towards the current year. The following July brings the second instalment.
The typical first-year pattern
- 31 January: the whole of year one's tax, plus 50% of the same figure on account for year two
- 31 July: a further 50% on account for year two
- 31 January the following year: the balance for year two, plus the first instalment for year three
Reducing payments on account
If your income has genuinely fallen, a claim can be made to reduce the instalments. It is not a free option: if you reduce them too far, HMRC charges interest on the shortfall. Base any reduction on real figures rather than optimism.
How to stop it hurting
Set money aside as you earn rather than at the deadline. A separate tax account with a fixed percentage of every payment received is the simplest habit and the one that most reliably prevents a January problem.
Filing the return early also helps — the deadline for paying is unchanged, but you know the figure months in advance.
This article is general guidance for business owners in the UK and does not amount to advice for your particular circumstances. Tax rules change and the right answer depends on your figures — please take specific advice before acting.
