YF AccountingLast updated: 23 July 2026
7 min read
Your second Self Assessment payment on account for 2025/26 is due on 31 July 2026 — just over a week away. The amount is half of your 2024/25 tax bill, and it should already be showing in your HMRC online account. If your income has dropped since last year, you can still apply to reduce it before you pay. Pay late and HMRC charges interest at 7.75% a year from 1 August — there is no grace period.
Here is how payments on account actually work, who has to make them, how to reduce the July payment legitimately, and what to do if the cash simply is not there.
What is due on 31 July 2026?
If you file a Self Assessment tax return and your last bill was big enough to trigger payments on account, the second instalment for the 2025/26 tax year falls due on 31 July 2026. It is not a new or extra tax — it is the second half of an advance payment towards a year that has already ended, calculated as 50% of what you owed for 2024/25.
The first thing to do this week is log into your HMRC online account and check the exact figure, so nothing about the next ten days is a surprise. The full list of the year’s dates is in our 2026/27 tax deadlines calendar.
How do payments on account work?
HMRC does not want to wait a full year to collect tax on income that is not taxed at source — self-employment profits, rental income, dividends and the like. So instead of one annual bill, you pay in two instalments: 31 January and 31 July. Each instalment is half of your previous year’s tax bill, and if you are self-employed it includes your Class 4 National Insurance.
When your actual bill for the year is finally worked out, anything still owing becomes a balancing payment due the following 31 January. If you have overpaid, HMRC refunds the difference or sets it against the next instalment.
Who has to make payments on account?
Not everyone. You are outside the system entirely if either of these applies:
- Your Self Assessment bill for the previous year was less than £1,000, or
- You paid more than 80% of the previous year’s tax at source — for example through your PAYE tax code.
If neither exception applies, HMRC expects the two instalments automatically. Not sure whether you should even be in Self Assessment? Start with our guide on whether you need to file a tax return.
How is the balancing payment worked out? A worked example
Say your 2024/25 bill came to £4,000. Your payments for 2025/26 look like this:
| Date | Payment | Amount |
|---|---|---|
| 31 January 2026 | First payment on account (50% of £4,000) | £2,000 |
| 31 July 2026 | Second payment on account (50% of £4,000) | £2,000 |
| 31 January 2027 | Balancing payment if your actual 2025/26 bill is £5,000 | £1,000 |
| 31 January 2027 | Plus first payment on account for 2026/27 (50% of £5,000) | £2,500 |
So if your income rose, next January brings £3,500 in one hit. If your actual bill came in below £4,000 instead, the overpayment is refunded or offset. The system is always catching up with reality one year behind — which is exactly why the first year hurts most.
Why does the first year feel so brutal?
The hardest year is always the first one with payments on account. Picture your first sizeable tax bill at £3,000. In that January you pay the £3,000 itself plus a £1,500 first payment on account, so £4,500 leaves your account in one hit. Then another £1,500 follows in July. That is a year and a half of tax landing within six months. It is completely normal, but it is brutal if nobody warned you — and it is exactly why putting money aside for tax through the year matters so much.
Can I reduce my July payment on account?
Yes — if your 2025/26 income was genuinely lower than 2024/25, you do not have to pay an estimate built on a stronger year. You can apply to reduce both payments on account:
- Online, through your Self Assessment account (“Reduce payments on account”), or
- By post, using form SA303, or
- On your tax return itself, if you are filing your 2025/26 return anyway — filing before 31 July with a lower actual bill automatically recalculates the July instalment.
That last route is the cleanest one this close to the deadline: if you know 2025/26 was a weaker year, getting the return filed now replaces the estimate with the real number. The gov.uk guidance on payments on account walks through the claim routes, and our Self Assessment guide covers the filing side.
What happens if I reduce my payments too far?
This is the risk to respect. If you reduce your payments on account and your actual bill turns out higher than your estimate, HMRC charges late payment interest on the shortfall — backdated to the original due dates, not from when the truth emerges. The current rate is 7.75% a year (Bank of England base rate plus 4%), which is expensive borrowing by any standard.
HMRC can also charge a penalty where a reduction claim was made fraudulently or negligently. So base any reduction on a realistic estimate of the year’s profits — accounts, bank figures, a proper projection — not wishful thinking.
What if I can’t pay by 31 July?
Do not just miss the date and hope. Three things worth knowing:
- Interest starts on 1 August at 7.75% a year on whatever is unpaid. The good news: the 5% late payment penalties that apply to balancing payments do not apply to payments on account — interest is the cost.
- Time to Pay is real and usable. If you owe £30,000 or less, are within 60 days of the deadline and have no other payment plans with HMRC, you can usually set up an instalment arrangement online without speaking to anyone. Interest still runs, but you stay out of the debt-collection process.
- Contact HMRC before the deadline, not after. Arrangements agreed early are almost always smoother.
One more date for the diary if you are self-employed with turnover above £50,000: Making Tax Digital for Income Tax went live on 6 April 2026, and the first quarterly update is due by 7 August 2026 — a week after this payment. July and August are not the months to fall behind on your bookkeeping.
Frequently asked questions
When is the second payment on account due?
31 July 2026 for the 2025/26 tax year. It is half of your 2024/25 Self Assessment bill and it covers income tax plus Class 4 National Insurance if you are self-employed. The exact figure is in your HMRC online account under your Self Assessment statement.
Do I have to make payments on account if my bill was under £1,000?
No. If your previous year’s Self Assessment bill was under £1,000, or you paid more than 80% of that year’s tax at source through PAYE or similar, payments on account do not apply. You simply pay your full bill by the following 31 January.
Is there a penalty for paying a payment on account late?
There is no fixed penalty, but interest runs from 1 August at 7.75% a year until you pay. The 5% late payment surcharges only apply to balancing payments, not payments on account. Interest at that rate still adds up quickly, so a Time to Pay arrangement usually beats simply paying late.
What happens if I reduce my payments on account too much?
HMRC charges interest on the difference between what you paid and what you should have paid, backdated to the original January and July due dates. The current rate is 7.75% a year. Penalties are possible where a claim was careless or dishonest, so reduce only on the basis of a realistic profit estimate.
Can I pay my tax bill in instalments?
Yes. HMRC’s Time to Pay service lets most people owing £30,000 or less set up a payment plan online. Interest still accrues at 7.75%, but you avoid escalation. You can also use a Budget Payment Plan to make voluntary weekly or monthly payments towards future bills so next July never stings.
Do payments on account cover capital gains tax and student loans?
No. Payments on account only cover income tax and Class 4 National Insurance. Capital gains tax and student loan repayments due through Self Assessment are collected with the balancing payment on 31 January, so budget for them separately even if your July payment is bang up to date.
Need a hand before 31 July?
If your 31 July figure looks wrong, or you think it should be lower because this year has been quieter, there is still time to check it properly and file a reduction claim before the deadline — but only just. We do fixed-fee accounting with no hourly billing: sole traders from £35 a month, limited companies from £50 a month.
Book a free, no-obligation call or ring us on 0161 531 0959 and we will review your position before the deadline, not after it.
This article is general information, not personal tax advice. For advice on your own situation, please get in touch.
Founder of YF Accounting — a fixed-fee, fully digital accountancy practice in Manchester serving SMEs, sole traders and landlords across the UK. One point of contact, unlimited support, no surprise bills.
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