Payments on account: why your first tax bill is so big
Updated 12 November 2026 · 2026/27 tax year
Many tradespeople get a shock with their second January tax bill: it's half as much again as they expected. That's payments on account, HMRC collecting next year's tax in advance.
What they are
Advance payments towards next year's tax bill. Each one is half of the tax and Class 4 National Insurance you owed for the year just gone. They're due on 31 January and 31 July.
When you don't have to make them
- Your last bill was under £1,000
- More than 80% of your tax was already taken off at source, for example through PAYE on a job or CIS deductions
A worked example
- Your first year's bill comes to £6,000
- 31 January: the £6,000 bill plus the first payment on account of £3,000 = £9,000
- 31 July: the second payment on account, £3,000
- Next January: the rest of that year's bill (the balancing payment), plus the first payment on account for the year after
What isn't included
Student loan repayments and capital gains tax are paid with the January bill but aren't part of payments on account.
If your profits fall
If you expect this year's bill to be lower, you can ask HMRC to reduce your payments on account, online or with form SA303. Don't cut them too far: if the real bill turns out higher, HMRC charges interest on the difference.
How to be ready
Put aside a share of every payment as you go, not just enough for this year's tax. In your first year of trading, aim for an extra half of your expected bill on top.
This guide is general information, not tax advice. Check HMRC's guidance or ask an accountant about your own situation.
More guides
- Self Assessment deadlines and penalties for the self-employed
- National Insurance for the self-employed: Class 2 and Class 4 explained
- The £1,000 trading allowance: who can use it, and when not to
- The cash basis: how most sole traders now work out their profit
- The Flat Rate VAT Scheme for tradespeople: rates and whether it's worth it