31 July Is Coming: Check Whether You Have a Payment on Account Due to HMRC!
A Complete Guide for Self Assessment, CIS Subcontractors, Sole Traders, Landlords, Directors and UK Taxpayers Who Want to Avoid Interest, Penalties and Unexpected Tax Bills
For many people who file a Self Assessment tax return in the UK, 31 July is one of the most important tax deadlines of the year.
It is not the deadline for filing your tax return.
It is not the main 31 January Self Assessment deadline.
But for many taxpayers, it is the deadline for the second Payment on Account.
This payment is one of the most common sources of confusion for self-employed individuals, CIS subcontractors, landlords, company directors, people receiving dividends, people with extra income and anyone with Self Assessment obligations in the UK.
Many clients ask:
“Why do I have to pay again in July?”
“Didn’t I already pay in January?”
“Is this a penalty?”
“Is this a new tax?”
“If I am under CIS and 20% has already been deducted, do I still need to pay?”
“If I earned less this year, can I reduce the amount?”
“What happens if I do not pay by 31 July?”
This article explains, in a clear and practical way, what Payment on Account is, who needs to pay it, who usually does not need to pay it, how it is calculated, when it can be reduced, what interest and penalties may apply, and what you should check before the deadline.
Executive Summary
If you are registered for Self Assessment, you may have a second Payment on Account due by 31 July.
Payment on Account means a payment in advance towards your next Self Assessment tax bill. Instead of paying everything in one amount on 31 January, HMRC may split part of your tax into two instalments:
first instalment: 31 January
second instalment: 31 July
Each instalment is usually half of your previous year’s tax bill.
Not every taxpayer has to make payments on account. In general, you usually do not need to make these payments if:
your previous Self Assessment tax bill was less than £1,000;
or more than 80% of your tax was already collected at source, for example through PAYE or other deductions.
If payments on account appear on your HMRC Self Assessment statement and you do not pay by the deadline, HMRC may charge interest for late payment and, if the amount remains unpaid, late payment penalties may also apply.
If your income has reduced compared with the previous year, you may be able to reduce your payments on account. However, you must be careful: if you reduce them too much and it later turns out that the tax was still due, HMRC may charge interest on the underpaid amount.
The practical rule is simple:
Log in to your HMRC online account, check your Self Assessment statement and confirm whether you have a Payment on Account due by 31 July.
1. What Is Payment on Account?
Payment on Account is a payment in advance towards your next Self Assessment tax bill.
In simple terms, HMRC looks at the tax you owed for the previous year and assumes that, if your situation is similar, your next tax bill may also be similar. Instead of waiting until the next 31 January deadline, HMRC asks for two advance payments.
These two payments are:
the first payment on 31 January;
the second payment on 31 July.
Each payment is normally 50% of your previous year’s tax bill.
Example:
If your previous Self Assessment tax bill was £4,000, HMRC may calculate two payments on account for the following year:
£2,000 due by 31 January;
£2,000 due by 31 July.
These payments are later deducted from your final tax bill for the next tax year.
2. Why Does Payment on Account Exist?
The purpose of payments on account is to spread the tax payment across two instalments instead of collecting the full amount in one go.
For HMRC, the system helps collect tax earlier.
For taxpayers, it can help spread the cost during the year.
The problem is that many taxpayers think Payment on Account is an additional tax.
It is not.
It is not a new tax. It is an advance payment towards your next tax year’s Self Assessment bill.
The confusion often appears in January, when a taxpayer may have to pay:
the balancing payment for the previous tax year;
the first Payment on Account for the next tax year.
Then, in July, the second Payment on Account becomes due.
3. Why Is 31 July Important?
31 July is the deadline for the second Payment on Account.
If your HMRC Self Assessment statement shows an amount due, it must be paid by the deadline.
For 2026, the relevant deadline is:
31 July 2026 — second Payment on Account for the 2025/26 tax year.
This payment is generally based on your previous year’s tax bill, meaning your 2024/25 tax bill, and it is later deducted from your final tax bill for 2025/26.
Important points:
If you have already filed your 2025/26 tax return early and HMRC knows the actual tax is lower, the amount may be adjusted.
If you have not yet filed your 2025/26 tax return, HMRC will usually continue to use the payment on account calculated from the previous year.
If your income has reduced, you may be able to reduce your payments on account.
If your income has increased, you may have an additional balancing payment due on 31 January 2027.
4. Who Should Check Whether They Have a Payment on Account Due to HMRC?
Payment on Account generally applies to people who file Self Assessment and had a significant amount of tax to pay for the previous year.
You should check whether you have a payment due if you are:
self-employed;
a sole trader;
a CIS subcontractor;
a landlord;
a company director receiving dividends;
a shareholder receiving dividend income;
someone receiving rental income;
someone receiving savings interest or investment income;
someone with extra income not fully taxed through PAYE;
someone with Income Tax payable through Self Assessment.
Important:
Being self-employed does not automatically mean you have Payment on Account.
Being a director does not automatically mean you have Payment on Account.
Being in Self Assessment does not automatically mean you have Payment on Account.
You need to check your tax calculation and your HMRC Self Assessment statement.
5. Who Usually Does Not Need to Pay Payment on Account?
You usually do not need to make payments on account if one of the following situations applies.
5.1 Your Previous Tax Bill Was Less Than £1,000
If the amount due through Self Assessment for the previous year was less than £1,000, HMRC will usually not ask you to make payments on account.
Example:
Previous Self Assessment tax bill: £750
Payment on Account: usually not required
5.2 More Than 80% of Your Tax Was Already Collected at Source
If most of your tax was already collected through PAYE, your tax code, CIS deductions or other deductions at source, HMRC may not ask you to make payments on account.
Example:
You have employment income taxed through PAYE and only a small amount of additional income through Self Assessment.
If more than 80% of your total tax was already collected through PAYE, HMRC may not require payments on account.
5.3 No Amount Appears on Your HMRC Self Assessment Statement
If you log in to your HMRC online account and there is no amount showing as due for 31 July, then you do not have that instalment to pay.
Do not guess. Check your statement.
6. Is Payment on Account a Penalty?
No.
Payment on Account is not a penalty.
It is not a fine.
It is not a separate tax.
It is not a new tax.
It is an advance payment towards your next Self Assessment tax bill.
However, if you do not pay the amount requested by HMRC on time, then the following may apply:
late payment interest;
late payment penalties, if the amount remains unpaid;
issues on your HMRC statement;
larger amounts to pay later.
That is why the more accurate message is:
“Check whether you have a Payment on Account due to HMRC and pay by 31 July to avoid interest and penalties.”
It is not ideal to simply say:
“Pay to avoid a fine.”
Technically, the first issue is usually late payment interest. Penalties may apply later if the amount remains unpaid.
7. How Is Payment on Account Calculated?
The simple formula is:
Previous tax bill divided by 2 = each Payment on Account
Example:
2024/25 tax bill: £5,000
First Payment on Account: £2,500
Second Payment on Account: £2,500
The first instalment is due on 31 January 2026.
The second instalment is due on 31 July 2026.
Together, the two instalments total £5,000 and are treated as advance payments towards the 2025/26 tax bill.
If the final 2025/26 tax bill is exactly £5,000, there is no balancing payment.
If the final 2025/26 tax bill is £6,200, there will be a balancing payment of £1,200 due on 31 January 2027.
If the final 2025/26 tax bill is £4,000, you have paid too much and may have a credit or refund.
8. Full Example: How the 31 July Amount Appears
Suppose a person filed their Self Assessment tax return for 2024/25 and the final tax bill was £3,000.
HMRC may calculate payments on account for 2025/26 as follows:
31 January 2026: £1,500
31 July 2026: £1,500
If the person paid the first instalment in January but forgets the second instalment in July, the HMRC statement will show £1,500 outstanding.
If the amount is not paid on time, HMRC may charge interest for late payment.
If the amount remains unpaid, penalties may also apply.
9. CIS Subcontractors: If 20% Has Already Been Deducted, Do I Still Need to Pay?
It depends.
Many CIS subcontractors believe that, because 20% CIS tax has already been deducted, there is nothing else to pay. Sometimes that is correct. Sometimes it is not.
CIS deductions are amounts withheld by the contractor and reported to HMRC. They are used to reduce your final tax bill through Self Assessment.
However, your final tax bill may include:
Income Tax;
Class 4 National Insurance, where applicable;
other income;
adjustments;
expenses;
CIS deductions;
other tax liabilities.
If CIS deductions cover the tax, you may receive a refund.
If CIS deductions do not cover the full tax liability, or if you have other income, you may still have tax to pay.
If your Self Assessment tax bill is high enough, HMRC may calculate payments on account.
For CIS subcontractors, the correct answer is:
Do not assume that 20% CIS automatically means everything has been paid. Check your Self Assessment calculation and HMRC statement.
10. Company Directors: Do They Need to Pay Payment on Account?
A Limited Company does not pay Self Assessment Payment on Account. The company has its own obligations, such as Corporation Tax, company accounts and CT600.
However, the director, as an individual, may have Self Assessment obligations.
A director may have Payment on Account if they receive:
dividends;
salary that has not been fully taxed;
benefits;
rental income;
investment income;
other personal income;
a Self Assessment tax liability.
Example:
A director receives a low salary through PAYE and higher dividends.
The tax on dividends is declared through Self Assessment.
If the tax bill exceeds the relevant limits, HMRC may calculate payments on account.
Important:
Payment on Account is a personal obligation of the director, not an obligation of the Limited Company.
11. Landlords: Rental Income and Payment on Account
Landlords are frequently affected by payments on account.
If you have rental income and the tax is not collected through PAYE, HMRC may require payments on account.
This is especially common if:
your rental income is significant;
you have taxable rental profit after expenses;
your Self Assessment tax bill exceeds the relevant limits;
not enough tax has been collected through PAYE.
Landlords need to be careful because rental income can create tax liabilities even if the money is used for mortgage payments, repairs or other property costs.
12. PAYE Employees: Can They Have Payment on Account?
Yes, in some situations.
Even if you are employed and taxed through PAYE, you may still have Self Assessment and payments on account if you have income that is not fully taxed at source.
Examples include:
dividends;
rental income;
self-employed income;
CIS income;
savings interest;
foreign income;
High Income Child Benefit Charge;
capital gains, although Capital Gains Tax is treated differently for payments on account;
other income declared through Self Assessment.
However, if more than 80% of your tax has already been collected at source, HMRC may not ask for payments on account.
13. What Is Usually Not Included in Payments on Account?
Payments on account mainly relate to Income Tax and Class 4 National Insurance for self-employed individuals, where applicable.
Capital Gains Tax and Student Loan repayments are treated differently and usually appear as part of the balancing payment, not as payments on account.
This is an area where taxpayers often confuse the final tax calculation with payments on account.
If you have capital gains, property disposals, crypto disposals or other gains, it is important to check exactly how your Self Assessment calculation is made.
14. Can Payment on Account Be Reduced?
Yes, you can ask to reduce your payments on account if you have a genuine reason to believe that your current year’s tax bill will be lower than the previous year’s.
Examples of situations where a reduction may make sense:
business profit has decreased;
you worked fewer months;
you had more allowable expenses;
rental income has decreased;
sales have reduced;
you stopped trading;
you moved from self-employed to PAYE employment;
your tax relief has increased;
more tax has been deducted at source than last year.
The reduction can be requested online or using form SA303.
Important:
Do not reduce payments on account simply because you do not want to pay.
The reduction should be based on a realistic estimate.
If you reduce too much and it later turns out that the amount was due, HMRC may charge interest on the difference.
15. Example: Correctly Reducing Payment on Account
Suppose your previous tax bill was £6,000.
HMRC requests:
31 January: £3,000
31 July: £3,000
However, this year your business has significantly reduced and you estimate that your final tax bill will only be £2,000.
In this case, you may request to reduce the total payments on account from £6,000 to £2,000.
The new payments may be:
31 January: £1,000
31 July: £1,000
If the estimate is correct, there is no issue.
However, if the final tax bill turns out to be £5,000, you have reduced the payments too much and HMRC may charge interest on the underpaid amount.
16. Common Mistake: Reducing Payments to Zero Without a Reason
Some taxpayers reduce payments on account to zero simply because they do not want to pay the July amount.
This is a mistake.
Reducing payments to zero only makes sense if your realistic estimate shows that there will be no tax to pay for that year.
Examples where reducing to zero may be justified:
you stopped trading;
you no longer have rental income;
you moved fully into PAYE employment and tax is collected through salary;
you have a tax loss;
CIS deductions or PAYE fully cover the tax;
you no longer have the income that created the previous tax bill.
If the activity continues and the income is similar, reducing to zero may lead to interest and problems later.
17. What Happens If You Do Not Pay by 31 July?
If you do not pay the amount due by the deadline, HMRC may charge late payment interest.
Interest applies to the outstanding amount and continues to accrue until the payment is made.
If the amount remains unpaid for longer, late payment penalties may also apply.
For Self Assessment, HMRC may charge penalties of 5% of the unpaid tax at 30 days, 6 months and 12 months, plus interest on the amount owed.
The practical conclusion is:
The sooner you pay, the more you reduce interest and the risk of penalties.
18. Can Interest Apply Even If I Do Not Receive a Letter?
Yes.
Interest can apply even if you do not receive a letter from HMRC immediately.
Your HMRC statement may show the outstanding amount, and interest may be calculated automatically.
That is why you should not wait for a letter in the post.
Check:
your HMRC online account;
your Self Assessment statement;
your tax calculation;
your payment history;
the amount due by 31 July.
19. How Do You Pay Payment on Account?
You can pay using HMRC-approved payment methods, such as:
GOV.UK online payment;
HMRC app;
online banking / Faster Payments;
debit card;
Direct Debit;
bank transfer;
other available methods depending on your situation.
Make sure you use the correct payment reference.
Normally, the Self Assessment payment reference is your 10-digit UTR followed by the letter K.
Example:
1234567890K
If you use the wrong reference, the payment may be allocated incorrectly or delayed.
20. How Long Does It Take for HMRC to See the Payment?
It depends on the payment method.
Some methods are same day or next day, such as Faster Payments. Other methods may take several working days.
If you are paying close to the deadline, use a fast payment method and check that the payment has been allocated.
Do not leave the payment until the last minute, especially if:
you have not paid HMRC before;
you need to set up a new Direct Debit;
you are unsure about the payment reference;
you have limited access to online banking;
you do not have your HMRC login ready.
21. What If You Cannot Pay in Full?
If you cannot pay in full, do not ignore the amount.
It is better to act quickly.
Possible options include:
paying what you can;
contacting HMRC;
checking whether you can set up a Time to Pay arrangement;
checking whether the Payment on Account can be legitimately reduced;
speaking to an accountant to estimate the correct tax position.
Important:
A Time to Pay arrangement does not mean the tax disappears.
Interest may still apply.
However, an agreed arrangement can help reduce the risk of escalation and further penalties.
22. Can You Pay in Advance or Monthly?
Yes.
HMRC allows taxpayers to make advance payments towards their next Self Assessment tax bill.
If you are up to date with previous payments, you may be able to use a Budget Payment Plan to make weekly or monthly payments by Direct Debit.
This can be useful for taxpayers who do not want to be surprised by large bills in January and July.
For many self-employed individuals and landlords, a good strategy is to put aside a percentage of income or profit each month for tax.
23. What Should You Check Before 31 July?
Before the deadline, check the following:
Do you have an active Self Assessment online account?
Can you access Government Gateway?
Have you checked your Self Assessment statement?
Does an amount show as due by 31 July?
Is the amount correct?
Did you pay the first instalment in January?
Has your income for the current year reduced?
Do you have a genuine reason to reduce Payment on Account?
Did you use the correct payment reference?
Have you checked whether the payment has been allocated?
If you are unsure, ask for help before the deadline, not after interest and penalties appear.
24. Quick Checklist for Clients
If You Have an Amount Due on 31 July
Check your HMRC statement.
Confirm the amount due.
Pay by 31 July.
Use the correct reference.
Keep proof of payment.
Check that the payment has been allocated in your HMRC account.
If Your Income Has Reduced
Estimate your real tax bill.
Check whether the reduction is justified.
Apply to reduce payments on account.
Do not reduce to zero without a valid reason.
Keep your calculations and documents.
If You Cannot Pay
Do not ignore the deadline.
Pay what you can.
Contact HMRC.
Check the Time to Pay option.
Speak to an accountant.
25. Practical Case Studies
Case Study 1: CIS Subcontractor with 20% Deductions
Ion works in construction as a CIS subcontractor. The contractor deducts 20% CIS tax from labour income.
Ion believes he has nothing else to pay.
At the end of the year, the accountant calculates:
income;
expenses;
CIS deductions;
Class 4 National Insurance;
other income.
If the CIS deductions cover the tax, Ion may receive a refund.
However, if a tax liability remains and exceeds the relevant limits, HMRC may ask for payments on account.
Conclusion:
CIS deductions help, but they do not automatically guarantee that Payment on Account will not apply.
Case Study 2: LTD Director Receiving Dividends
Maria is a director and shareholder of a Limited Company. She receives a small salary through PAYE and dividends.
Dividend tax is declared through Self Assessment.
Because her personal tax bill is significant, HMRC calculates payments on account.
Maria needs to understand that:
the company has separate Corporation Tax obligations;
dividends are declared personally;
Payment on Account is personal, not a company liability;
31 July may be the deadline for the second personal instalment.
Case Study 3: Landlord with Rental Income
Andrei owns a rental property. The rent produces taxable profit after expenses.
The tax is not collected through PAYE.
His Self Assessment shows a tax bill of £2,800.
HMRC calculates:
£1,400 Payment on Account due on 31 January;
£1,400 Payment on Account due on 31 July.
If Andrei forgets the July instalment, HMRC may charge interest.
Case Study 4: Lower Income Compared with the Previous Year
Elena had high profits last year, but this year she worked less.
HMRC requests the second Payment on Account based on the previous year.
If Elena correctly estimates that her tax bill will be much lower, she may request to reduce payments on account.
However, if she reduces too much and the real profit is higher than expected, HMRC may charge interest on the difference.
26. Most Common Mistakes
Mistake 1: “I Paid in January, So I Have Nothing Else to Pay”
Not always. In January, you may have paid a balancing payment plus the first Payment on Account. The second instalment may still be due on 31 July.
Mistake 2: “I Am CIS, They Deducted 20%, So I Definitely Owe Nothing”
Not guaranteed. You must check the final tax calculation.
Mistake 3: “I Did Not Receive a Letter, So I Do Not Owe Anything”
Do not rely only on letters. Check your HMRC online account.
Mistake 4: “Payment on Account Is a Penalty”
It is not a penalty. It is an advance payment. Interest and penalties may apply if you do not pay on time.
Mistake 5: “I Will Reduce the Amount to Zero and Solve the Problem”
The reduction must be justified. If you reduce too much, HMRC may charge interest.
Mistake 6: “I Will Pay on the Evening of 31 July”
This is risky. If the payment does not arrive or the reference is wrong, problems can occur.
27. Frequently Asked Questions
Does Everyone Who Files Self Assessment Need to Pay on 31 July?
No. Only people with payments on account calculated by HMRC.
Where Do I Check If I Have to Pay?
In your HMRC online account, under your Self Assessment statement.
Can I Pay Before 31 July?
Yes. You can pay before the deadline.
If I Paid Too Much, Will I Get the Money Back?
If your tax return shows that you paid too much, you may have a credit or refund.
What If I Cannot Afford to Pay?
Contact HMRC, check Time to Pay and speak to an accountant. Do not ignore the amount.
Can I Reduce Payment on Account?
Yes, if you have a genuine reason to believe your tax bill will be lower.
Can I Reduce It to Zero?
Yes, but only if your realistic estimate shows that no tax will be due. Do not reduce to zero without a valid reason.
Is Payment on Account the Same as Corporation Tax?
No. Payment on Account is linked to personal Self Assessment. Corporation Tax is a company tax.
If I Am a Director of a Limited Company, Who Pays?
The director pays personally if there is Self Assessment tax due. The company pays Corporation Tax separately.
Can Landlords Have Payment on Account?
Yes, if the Self Assessment tax bill meets the relevant conditions.
28. What Should You Do Now?
If you are reading this before 31 July, take the following steps:
Log in to your HMRC online account.
Check your Self Assessment statement.
Look for any amount due by 31 July.
Check whether the amount is correct.
If your income has decreased, calculate whether you can reduce payments on account.
If the amount is correct, pay before the deadline.
Keep proof of payment.
Check later that the payment has been allocated.
If you cannot pay, contact HMRC or ask for help.
29. How DCTaxAgent Ltd Can Help
DCTaxAgent Ltd can help clients with:
checking the HMRC Self Assessment statement;
calculating payments on account;
reducing payments on account, where justified;
Self Assessment Tax Returns;
CIS Tax Returns;
CIS refund claims;
landlord tax returns;
director Self Assessment;
dividend tax planning;
checking tax codes;
estimating the tax bill;
communicating with HMRC;
support for clients who do not understand the amount due on 31 July.
If you do not know whether you have a Payment on Account due to HMRC by 31 July, do not wait until interest and penalties appear.
Check in advance.
30. Conclusion
31 July is an important date for many Self Assessment taxpayers.
If HMRC has calculated a Payment on Account, the second instalment must be paid by the deadline.
Payment on Account is not a penalty and it is not a new tax. It is an advance payment towards your next tax bill.
However, if you ignore it, interest, penalties and unnecessary stress may follow.
The golden rule is:
31 July is coming: check whether you have a Payment on Account due to HMRC. If you have an amount to pay, pay on time or check whether you have a genuine reason to reduce it.
For self-employed individuals, CIS subcontractors, landlords, directors and people with extra income, this check can make the difference between a controlled tax position and an unexpected HMRC problem.
Disclaimer
This article is for general information and educational purposes only and does not constitute personalised tax advice, legal advice or financial advice.
The rules around Self Assessment, Payment on Account, interest, penalties, CIS deductions, PAYE, rental income, dividends and tax liabilities can vary depending on individual circumstances.
DCTaxAgent Ltd accepts no responsibility for decisions made solely based on this article without personalised advice. For an accurate review, consult an accountant or tax adviser.