What is the July Payment on Account and Do You Need to Pay?

While managing tax deadlines is rarely the highlight of the season, ensuring your payment is made on time will help you avoid unnecessary interest charges. Here is a straightforward guide to managing your upcoming payment and what to do if you need to reduce it.

Who Needs to Pay?

If you are in the Self-Assessment system, you generally need to make advance payments towards your next tax and Class 4 National Insurance bill if your previous year's tax bill was £1,000 or more.

There is one main exception: you won't need to make these payments if you've already paid more than 80% of your owed tax outside of Self-Assessment, such as through a standard PAYE setup.

How it's calculated

Each Payment on Account is exactly 50% of your tax and Class 4 National Insurance liability from the previous tax year. The first half was due back on 31 January, and the second half is due on 31 July.

What if I Miss the Deadline?

It's essential to pay the full amount by the 31 July 2026 deadline. If you don't pay on time, HMRC will start charging you interest on the outstanding balance from the 31 July due date right up until the day the payment is made in full.

What if Your Profits Have Dropped?

Because this July payment happens after the tax year has actually finished, you might already have a firm understanding of what your profits were for the year.

If your taxable income has fallen—perhaps you took some time off or business was simply slower—you don't necessarily have to pay the full estimated amount. You should compare your requested payment on account to what your actual payments for the year will be. If you know your bill will be lower this year, you can actively ask HMRC to reduce your payments on account.

How to Reduce Your Payment

If you need to make an adjustment, the process is straightforward. You can apply for a reduction in two ways:

• Online: Sign into your personal tax account, select the option to view your Self-Assessment return, and click on ‘reduce payments on account’.

• By Post: You can mail in an application using form SA303.
  

A Quick Word of Warning

While it is beneficial to reduce your payments if your income dropped, be careful with your estimates. If you reduce your payments on account by too much, interest will be charged on the shortfall.

Need Help with Your Tax Return?

Managing your tax liabilities can be complex, especially when your income fluctuates from year to year. If you need assistance in calculating your tax liability or submitting an application to reduce your payments on account, please get in touch with our team today to ensure your affairs are in order before the 31 July deadline.

Frequently Asked Questions (FAQs)

What is the deadline for the second payment on account?

The second Self-Assessment payment on account is due by 31 July 2026.

Who has to make payments on account?

Taxpayers in the Self-Assessment system must make payments on account if their previous year's tax bill was £1,000 or more. However, you do not need to make these payments if you have already paid more than 80% of your owed tax outside of Self-Assessment, such as through PAYE.

How is a payment on account calculated?

Each payment on account is exactly 50% of your total tax and Class 4 National Insurance liability from the previous tax year.

What happens if I miss the July payment on account deadline?

If you do not pay the full amount by the 31 July deadline, HMRC will charge interest from that due date until the day the payment is made in full.

Can I reduce my payment on account?

Yes, if your taxable income has fallen and you know your tax bill will be lower this year, you can ask HMRC to reduce your payments. You can apply for this reduction online through your personal tax account or by post using form SA303.

What happens if I reduce my payment on account by too much?

If you estimate your income incorrectly and reduce your payments on account by too much, interest will be charged on the shortfall.