If you're self-employed, a landlord, or complete a self-assessment tax return, there's an important deadline you shouldn't overlook.
While most people are familiar with the 31st January self-assessment deadline, many are less aware of the 31st July Payment on Account. Missing this payment could result in interest being charged by HMRC, so it's worth understanding what it is, whether it applies to you, and what your options are if you're concerned about paying on time.
What Is a Payment on Account?
A Payment on Account is an advance payment towards your next self-assessment tax bill.
Rather than paying all of your tax once the tax year has ended, HMRC asks many taxpayers to make two instalments during the year.
The payment dates are:
31st January – Your balancing payment for the previous tax year, plus your first Payment on Account for the current tax year.
31st July – Your second Payment on Account.
Each payment is normally 50% of your previous year's tax bill, excluding Capital Gains Tax and most Student Loan repayments.
The aim is to spread your tax payments across the year, making them easier to manage and helping to avoid one large payment the following January.
Who Needs to Make the 31st July Payment?
The second Payment on Account generally applies if you:
Are self-employed.
Are a member of a business partnership.
Receive untaxed income, such as rental income from investment properties.
Complete a self-assessment tax return and are required to make Payments on Account.
Typically, you'll need to make Payments on Account if your last self-assessment tax bill was more than £1,000 and less than 80% of your tax was collected through PAYE.
If you're not sure whether the 31st July payment applies to you, it's always worth checking before the deadline.
How Can You Check What You Owe?
The easiest way to check what's due is by logging into your HMRC online account.
You'll be able to see:
Your Payment on Account amount.
Any outstanding tax balances.
Payment deadlines.
Previous payments you've made.
If Hammond-Barr prepares your self-assessment tax return, we can also confirm exactly what is due and when it needs to be paid.
Checking early gives you time to budget, ask questions and avoid any last-minute surprises.
What If Your Income Has Fallen?
Payments on Account are based on your previous year's tax bill, not your current year's earnings.
If your income has reduced significantly, perhaps because your business has slowed, you've stopped receiving rental income, or your circumstances have changed, you could be paying more than you're likely to owe.
In some situations, you can apply to reduce your Payments on Account.
However, this should only be done if you genuinely expect your tax bill to be lower. If your payments are reduced too much and your final tax bill turns out to be higher, HMRC may charge interest on the difference.
It's always worth speaking to your accountant before making a claim so you can be confident you're making the right decision.
What Happens If You Can't Pay by 31st July?
If you're worried about paying your tax bill, don't ignore it.
The earlier you take action, the more options you're likely to have.
HMRC may be able to offer a Time to Pay Arrangement, allowing you to spread the cost over an agreed period instead of paying everything at once.
If you're concerned about meeting the deadline:
Check exactly what you owe.
Make sure all outstanding tax returns have been submitted.
Speak to your accountant as soon as possible.
Contact HMRC before the payment becomes overdue.
Taking action early is almost always better than waiting until interest starts to build.
Five Simple Ways to Stay Ahead of Future Tax Deadlines
Managing your tax throughout the year makes meeting deadlines much less stressful.
Here are five habits that can help.
1. Set Money Aside Regularly
Putting aside a percentage of your income each month means you'll be better prepared when tax payments become due.
2. Keep Your Records Up to Date
Accurate bookkeeping makes completing your tax return quicker, easier and far less stressful.
3. Review Your Tax Position Throughout the Year
Don't wait until 31st January to find out what you owe. Regular reviews give you time to plan ahead and reduce the risk of unexpected tax bills.
4. Keep Your Accountant Informed
Starting a new business, buying a rental property, taking on additional income or changing how you operate can all affect your tax position.
Keeping your accountant up to date means they can give you the right advice at the right time, helping you avoid unexpected tax bills and identify opportunities to plan more effectively.
5. Ask Questions Early
If you're unsure about anything, ask. A quick conversation now can often prevent a much bigger problem later.
We're Here to Help
The 31st July Payment on Account often catches people by surprise, but it doesn't have to.
By understanding what you owe, checking your HMRC account early and planning ahead, you can avoid unnecessary stress and stay in control of your tax affairs.
Whether you're self-employed, a landlord or a limited company director, we're here to help you understand your responsibilities and make tax as straightforward as possible.
At Hammond-Barr, we believe accounting should be clear, practical and tailored to your individual circumstances. We'll explain what matters in plain English, answer your questions and help you plan ahead with confidence.
If you're unsure whether you need to make a Payment on Account, think your payments should be reduced, or simply want some guidance before the 31st July deadline, get in touch with our team. We're here to help.
Want to know more?
You can contact Hammond-Barr accountants on 01438 281281 or via email at [email protected].
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