If you complete a UK Self Assessment tax return and your last bill came in above £1,000, HMRC almost certainly expects you to make a payment on account by midnight on Friday 31 July 2026. This is the second of two advance instalments towards your 2025/26 tax bill, each set at 50 per cent of your 2024/25 liability. Miss it and HMRC adds interest from 1 August at the current rate of 8.5 per cent, plus an automated penalty if the payment remains outstanding 30 days later.
For most self-employed workers, landlords and higher-earning PAYE employees with side income, payment on account is the part of Self Assessment that catches people out — particularly first-time filers, who often discover they owe 150 per cent of their first year’s tax bill in one go. This guide walks through exactly how the system works, what to pay on 31 July 2026, how to legitimately reduce a payment if your income has fallen, and what happens if you cannot pay on time.
Key Takeaways
- The second 2025/26 payment on account is due by 23:59 on Friday 31 July 2026, set at 50 per cent of the 2024/25 tax bill.
- You only have to make payments on account if your last Self Assessment bill was over £1,000 and less than 80 per cent of your tax was collected through PAYE.
- First-time taxpayers typically pay up to 1.5 times their first year’s tax bill on 31 January — the final balance plus the first payment on account — which is the single biggest cash-flow shock in UK Self Assessment.
- If your 2025/26 income is lower than 2024/25, you can apply to reduce both payments using form SA303 (online or paper) up to 31 January 2027.
- Late payment interest currently runs at 8.5 per cent from 1 August, with a 5 per cent surcharge added if the balance is still unpaid 30 days later.
Key Dates 2026
| Date | What’s Due | Who It Applies To |
|---|---|---|
| 31 January 2026 (passed) | Final 2024/25 tax bill + first 2025/26 payment on account | Anyone who filed a 2024/25 Self Assessment return |
| 5 April 2026 (passed) | 2025/26 tax year ends | All UK taxpayers |
| 6 April 2026 (passed) | 2026/27 tax year begins | All UK taxpayers |
| 31 July 2026 | Second 2025/26 payment on account (50% of 2024/25 bill) | Anyone with a 2024/25 tax bill over £1,000 not collected via PAYE |
| 31 October 2026 | Paper Self Assessment return deadline (2025/26) | Filers using paper SA100 form |
| 31 January 2027 | Online 2025/26 return + final balancing payment + first 2026/27 payment on account | All online filers |
What Is Payment on Account?
Payment on account is HMRC’s mechanism for spreading the tax owed on income not taxed at source. Instead of collecting the whole annual bill in one lump after the tax year ends, HMRC takes two advance instalments — one in January and one in July — each based on the assumption that this year’s bill will be similar to last year’s. When you file your next Self Assessment return, the payments on account are credited against the actual bill and any difference is settled (or refunded) at the next 31 January.
The system applies mainly to people whose income falls outside the PAYE system: sole traders, partners in a partnership, landlords with rental income, anyone with dividend or investment income above £500 a year, and higher-earning PAYE employees whose untaxed side income tips them over the threshold. If you are a standard employee with all your tax collected through PAYE, you will not normally receive payment-on-account demands.
Who Has to Pay?
HMRC automatically enrols you in payment on account if both of the following apply to your most recent Self Assessment return:
- Your final Self Assessment tax bill was more than £1,000 (including Class 4 National Insurance for the self-employed).
- Less than 80 per cent of your tax was collected at source through PAYE on employment income.
If either condition is not met — for example, your 2024/25 bill was £950, or 90 per cent of your tax came out of your salary — you do not have to make payments on account. The number to watch is in the "Payments on account" section of your HMRC online account, or in the calculation that follows your tax return submission.
How Payment on Account Is Calculated
Each payment on account is 50 per cent of your previous year’s tax bill. HMRC does not try to predict the current year’s income — it simply assumes your liability will mirror last year, and adjusts at the next return.
Worked example. Sarah is a freelance copywriter. Her 2024/25 Self Assessment tax bill came in at £6,400. Because that is above £1,000 and none of it was deducted via PAYE, HMRC sets up payments on account for 2025/26 at £3,200 each. Sarah paid the first £3,200 alongside her 2024/25 final bill on 31 January 2026, and the second £3,200 is due by 31 July 2026.
If Sarah’s actual 2025/26 tax bill comes in at £7,000 when she files in January 2027, she will owe a balancing payment of £600 (£7,000 minus the £6,400 already paid in advance) plus the first payment on account for 2026/27 at £3,500.
If her 2025/26 bill instead comes in at £5,800, HMRC refunds the £600 overpayment.
The First-Year Surprise: Why You Owe 1.5 Times Year One
The most common Self Assessment shock hits first-time filers who started self-employment or rental income in 2024/25 and have a tax bill above £1,000. When you file by 31 January 2026, HMRC asks you to pay:
- The full 2024/25 tax bill — for example, £1,400.
- The first payment on account for 2025/26 — 50 per cent of the 2024/25 bill — another £700.
That is £2,100 due by midnight on 31 January 2026. The second payment on account for 2025/26 (£700) is then due 31 July 2026, and the cycle continues at one-and-a-half-times the next year’s bill from there onwards.
This is why HMRC, MoneyHelper and the Low Incomes Tax Reform Group consistently warn first-year Self Assessment filers to set aside 30-35 per cent of self-employed profit for tax — the second-year cash flow shock comes from doubling up the year-end bill with two advance payments for the year ahead.
How to Pay Your 31 July Bill
HMRC accepts payment by several methods. Times below are for funds to reach HMRC, not for you to instruct the payment:
- Online or telephone banking (Faster Payments) — same day or next day. The fastest method.
- CHAPS — same working day. Used by accountants for large balances.
- Bacs — three working days. Plan ahead.
- Direct Debit — five working days for a new instruction, three working days for an existing one.
- Debit card or corporate credit card via gov.uk — same day. Personal credit cards are no longer accepted.
- Cheque by post — allow at least three working days. Cheques must reach HMRC by the deadline, not be posted on the deadline.
Use your Unique Taxpayer Reference (UTR) followed by the letter K as the payment reference (for example, "1234567890K"). Without the K, HMRC may allocate the payment to the wrong tax year and you can still end up showing an unpaid balance.
How to Reduce Your Payment on Account: Form SA303
If your 2025/26 income or profits are clearly going to be lower than 2024/25 — for example, you took maternity leave, lost a major client, or your investment income dropped — you can ask HMRC to reduce both payments on account. The mechanism is a Claim to Reduce Payments on Account, also known as form SA303.
You can submit it online through your HMRC Self Assessment account (the fastest option) or by post on the SA303 paper form. You must claim by 31 January 2027 for the 2025/26 payments on account. HMRC does not verify the figure when you submit the claim — but if your actual return comes in higher than your reduced estimate, you will be charged interest on the underpayment from the original due dates.
The realistic rule of thumb: only reduce if you have a clear evidence base that this year’s profit is meaningfully lower (say, 20 per cent or more) than last year’s. Reducing by guesswork to ease July cash flow usually results in an interest charge the following January.
Late Payment: Interest and Penalties
Late payment carries two costs. From 1 August 2026, HMRC charges interest on any unpaid 31 July balance at the current rate of 8.5 per cent — set as the Bank of England base rate plus 4 percentage points and reviewed at each base rate change.
On top of interest, the standard automatic surcharge structure for late Self Assessment payments applies if the balance remains unpaid 30 days after the deadline. The summary below applies to balancing payments (typically the January charge), with similar rules in practice for payments on account if left unpaid into the new tax year.
| How Late | Charge |
|---|---|
| 1 day-29 days late | Interest only (8.5% p.a. on unpaid balance) |
| 30 days late | 5% surcharge on the unpaid balance, plus continuing interest |
| 6 months late | Further 5% surcharge, plus continuing interest |
| 12 months late | Further 5% surcharge, plus continuing interest |
If you genuinely cannot pay by 31 July, the best course of action is to call HMRC’s Self Assessment helpline (0300 200 3310) before the deadline and ask about a Time to Pay arrangement. HMRC will typically agree a payment plan of up to 12 months for balances under £30,000 if you set it up before the debt becomes overdue.
Common Payment-on-Account Mistakes to Avoid
- Forgetting the K on the payment reference. Payments without the "K" suffix can sit unallocated against your record, triggering chase letters even when you have paid.
- Reducing too aggressively. HMRC charges interest from the original due dates if your actual liability turns out higher than your SA303 estimate.
- Confusing payment on account with the balancing payment. The July payment is part of the next year’s tax, not a refund of last year’s. Treat it as ring-fenced.
- Paying from a personal credit card. No longer accepted by HMRC — payments must be made by debit card, bank transfer, Direct Debit or cheque.
- Setting the money aside in a current account. A dedicated tax-savings pot in an easy-access account paying 4 per cent or more (see our best easy-access savings accounts UK 2026 guide) earns interest while it waits.
Our Verdict for 31 July 2026
If you owe a 31 July payment on account, make the payment by Faster Payments at least one working day before the deadline, with your UTR followed by the letter K as the reference. If your 2025/26 income is materially lower than 2024/25, file a Claim to Reduce Payments on Account (SA303) online — it takes about ten minutes inside your HMRC account. And if you cannot pay, call HMRC before 31 July to set up a Time to Pay plan — the system is designed to be forgiving as long as you talk to them in advance, and considerably less so if you wait for the chase letter.
Frequently Asked Questions
Do I have to make a payment on account if my tax bill was under £1,000?
No. Payments on account only apply if your most recent Self Assessment bill was over £1,000 and less than 80 per cent of your tax was deducted via PAYE. Below either threshold, HMRC takes the full liability at the next 31 January only.
What if I’m a PAYE employee with a small amount of side income?
You may still owe Self Assessment, but if at least 80 per cent of your overall tax is collected through PAYE on your salary, you will not be put into payment on account. Your full bill comes due at 31 January each year instead.
Can I claim back a payment on account if I overpay?
Yes. When you file your next return, any overpayment is automatically credited against the next year’s first payment on account. You can also request a refund by bank transfer through your HMRC online account if there is no further tax to pay.
What happens if I file my return late but pay on time?
The £100 late filing penalty still applies for missing the 31 January deadline, but a payment that arrives on time is not penalised further. The two systems run in parallel — pay on time even if your return is still being finalised.
How do I check what I owe on 31 July?
Log in to your HMRC Self Assessment account at gov.uk. The amount due on 31 July appears under "Self Assessment payments" or "What you owe". The same screen shows the payment reference (UTR + K) you need to use.
Can I pay my payment on account early?
Yes — paying early has no cost and removes the deadline pressure. You can also set up a Direct Debit Budget Payment Plan that drip-feeds money to HMRC weekly or monthly, automatically offsetting against the next payment on account.
Does Making Tax Digital change payment on account?
Not for now. Making Tax Digital for Income Tax Self Assessment is being phased in from April 2026 for sole traders and landlords earning over £50,000, with a £30,000 threshold from April 2027 and a £20,000 threshold from April 2028. It changes how you file (quarterly digital updates), but the underlying payment on account schedule remains the same.
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