Why Has My HMRC Tax Bill Doubled? Payment on Account Explained
 

If you have completed your Self Assessment tax return and noticed that the amount due to HMRC looks much higher than expected, you are not alone.

Many self-employed individuals, landlords, company directors and people with untaxed income are surprised when their HMRC bill appears to have “doubled”.

In many cases, this is not because HMRC has charged you an extra tax. It is because of something called Payment on Account.

Payment on Account can be confusing when you first see it, especially if nobody has explained how it works. This guide explains what it means, why HMRC asks for it, when it applies, how the payment dates work, and what you can do if your income is expected to fall.

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What is Payment on Account?

Payment on Account is an advance payment towards your next Self Assessment tax bill.

Instead of waiting until the end of the next tax year and collecting everything at once, HMRC asks some taxpayers to pay part of their expected future tax bill in advance.

The amount is usually based on your previous year’s Self Assessment tax bill.

This is why your January payment can feel much higher than expected. You may not only be paying the tax still owed for the year that has already ended. You may also be paying the first advance payment towards the current tax year.

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Why does my HMRC bill look like it has doubled?

Your HMRC bill may look like it has doubled because you are being asked to pay two things at the same time:

1. The balancing payment
   This is the tax still owed for the tax year that has already ended.

2. The first Payment on Account
   This is an advance payment towards the current tax year.

For example, if you are filing your 2025/2026 Self Assessment tax return, your payment due by 31 January 2027 may include:

• the tax still owed for 2025/2026, and

• the first advance payment towards 2026/2027.

That is why the January amount can look much larger than expected.

It does not always mean your tax has doubled. It usually means HMRC is asking you to pay what remains for the previous tax year, plus an advance towards the current tax year.

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Simple example

Let’s say your Self Assessment tax bill for 2025/2026 is £4,000.

If Payment on Account applies, HMRC may ask you to pay:

• £4,000 balancing payment for 2025/2026

• £2,000 first Payment on Account towards 2026/2027

• £2,000 second Payment on Account towards 2026/2027

In this example, your January 2027 payment could be £6,000:

• £4,000 for the tax year just ended, plus

• £2,000 as the first advance payment for the current tax year.

Then, by 31 July 2027, you would pay the second advance payment of £2,000.

This is why many people feel like the tax bill has suddenly doubled.

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When are Payments on Account due?

Payments on Account are normally due in two equal instalments:

31 January – first Payment on Account
31 July – second Payment on Account

The 31 January payment is usually due on the same date as your balancing payment for the previous tax year.

For example, for the 2025/2026 tax year:

• the balancing payment for 2025/2026 is due by 31 January 2027

• the first Payment on Account for 2026/2027 is also due by 31 January 2027

• the second Payment on Account for 2026/2027 is due by 31 July 2027

This timing is one of the main reasons January can feel expensive for Self Assessment taxpayers.

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Who usually has to make Payments on Account?

Payments on Account usually apply if:

• your previous Self Assessment tax bill was more than £1,000, and

• not enough tax was already collected at source.

Tax collected at source means tax that has already been deducted before you receive the income. This can include tax collected through PAYE, for example if you are also employed and tax is deducted from your wages.

In simple terms, HMRC is more likely to ask for Payments on Account if you have income that is not fully taxed before you receive it.

This can include:

• self-employed income

• property income

• dividend income

• partnership income

• some director/shareholder income

• untaxed income from other sources

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Who may not need to make Payments on Account?

You may not need to make Payments on Account if your previous Self Assessment bill was £1,000 or less.

You may also not need to make them if most of your tax has already been collected at source, for example through PAYE.

This is why two people with similar income can have different HMRC payment positions. It depends not only on how much income they earned, but also on how much tax was already collected during the year.

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Is Payment on Account an extra tax?

No. Payment on Account is not an extra tax.

It is an advance payment towards your future Self Assessment bill.

The confusion comes from the timing.

You may feel like you are paying more because HMRC asks for the balancing payment for the previous year and the first advance payment for the current year at the same time.

However, the Payment on Account should be credited against your future tax bill.

When your actual tax bill for the current year is calculated, HMRC will compare the payments you made in advance with the final amount owed.

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What happens when the real tax bill is calculated?

When you later submit the Self Assessment tax return for the current year, HMRC checks whether your Payments on Account were enough.

There are three possible outcomes.

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1. Your Payments on Account were correct

If your income and tax are similar to the previous year, the advance payments may roughly match the tax owed.

In that case, there may be little or no extra tax to pay, apart from any new Payments on Account for the next year.

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2. Your Payments on Account were too low

If your income increases, your actual tax bill may be higher than the Payments on Account you already made.

In that case, you may need to make a balancing payment by the following 31 January.

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3. Your Payments on Account were too high

If your income falls, your Payments on Account may be higher than the tax actually due.

In that case, the overpayment may be refunded or offset against other tax owed.

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Can I reduce Payments on Account?

Yes, in some cases you can ask HMRC to reduce your Payments on Account.

This may be appropriate if you genuinely expect your income or profit to be lower in the current tax year.

For example, this may apply if:

• your self-employed profit has reduced

• you have stopped trading

• your rental income has reduced

• you have fewer contracts

• you have moved from self-employment to employment

• your dividends are lower

• more tax is now being deducted through PAYE

• your tax reliefs have increased

However, you should be careful.

If you reduce your Payments on Account too much and your final tax bill is higher than expected, HMRC can charge interest on the underpaid amount.

This is why it is important to make a realistic estimate before reducing the payment.

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Example: reducing Payments on Account

Let’s say your tax bill for 2025/2026 was £6,000.

HMRC may ask for two Payments on Account for 2026/2027:

• £3,000 by 31 January 2027

• £3,000 by 31 July 2027

But if you know your profit in 2026/2027 will be much lower, you may be able to reduce those payments.

For example, if your expected tax bill for 2026/2027 is only £3,000, it may be possible to reduce each Payment on Account to £1,500.

The key point is that the reduction should be based on a reasonable estimate, not just because you do not want to pay.

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Why HMRC uses this system

HMRC uses Payments on Account because many Self Assessment taxpayers do not have tax deducted automatically throughout the year.

Employees usually pay tax monthly through PAYE.

Self-employed individuals, landlords and others with untaxed income often pay tax later through Self Assessment.

Payments on Account are designed to bring Self Assessment taxpayers closer to the system used by employees, where tax is paid during the year rather than entirely after the year has ended.

However, the system can still feel difficult for people with fluctuating income, seasonal work or irregular cashflow.

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Why this affects self-employed people

Self-employed people are commonly affected because tax is not usually deducted from their income at source.

If you are self-employed, your tax bill may include Income Tax and Class 4 National Insurance.

Payments on Account can include Class 4 National Insurance as well as Income Tax.

This means your January and July payments can be significant, especially if your profit increased in the previous tax year.

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Why this affects landlords

Landlords can also be affected by Payments on Account.

If your rental income creates a Self Assessment tax bill of more than £1,000, and the tax has not already been collected through PAYE, HMRC may ask for Payments on Account.

This can surprise landlords who are used to paying tax once a year.

It is especially important for landlords to plan ahead, because rental income can fluctuate due to mortgage interest, repairs, void periods and other property expenses.

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Why this affects company directors

Company directors may also be affected, especially if they receive dividends or other income not taxed at source.

For example, a director/shareholder who takes dividends from a limited company may have a Self Assessment tax bill.

If that bill is over the threshold and not enough tax has been collected at source, HMRC may ask for Payments on Account.

This is one reason why directors should not only plan Corporation Tax for the company, but also their personal Self Assessment position.

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Common mistake: thinking the bill is wrong

One of the most common reactions is:

“HMRC has made a mistake — my tax has doubled.”

Sometimes HMRC calculations can need checking, but very often the reason is Payment on Account.

Before assuming the tax bill is wrong, it is important to check whether the amount includes:

• balancing payment for the previous year

• first Payment on Account

• second Payment on Account

• student loan repayments, if applicable

• High Income Child Benefit Charge, if applicable

• Capital Gains Tax, if applicable

• late payment interest or penalties, if applicable

A proper review can help confirm whether the figure is correct.

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Common mistake: reducing the payment without checking

Another common mistake is reducing Payments on Account without calculating the expected tax bill properly.

This can create problems later.

If the payments are reduced too far, HMRC may charge interest because not enough tax was paid on time.

It is better to calculate a realistic estimate before making the reduction.

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Common mistake: ignoring the July payment

Many people remember the January deadline but forget about the July payment.

The second Payment on Account is due by 31 July.

This payment is not a new tax bill. It is usually the second half of the advance payment for the current tax year.

Ignoring the July payment can lead to interest and cashflow problems.

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How to plan for Payments on Account

If you are self-employed, a landlord, a director or someone with untaxed income, it is worth planning ahead.

Good steps include:

• setting money aside regularly for tax

• reviewing your profit before January

• checking whether Payments on Account will apply

• reviewing whether your income is likely to fall

• asking your accountant before reducing payments

• keeping bookkeeping up to date

• filing your Self Assessment early where possible

Filing early does not mean you have to pay early, but it gives you more time to plan.

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Should I file my tax return early?

Yes, if possible.

Filing early can help you understand your tax position sooner.

If you wait until January, you may discover too late that you have a balancing payment and a Payment on Account due at the same time.

By filing earlier, you can see the figures, plan cashflow, and decide whether a reduction claim is appropriate.

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What should I do if I cannot pay?

If you cannot pay your Self Assessment bill on time, do not ignore it.

You may be able to contact HMRC and discuss payment options, such as a Time to Pay arrangement, depending on your circumstances.

It is usually better to deal with the issue early rather than waiting for interest and penalties to build up.

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How DCTaxAgent can help

At DCTaxAgent, we help clients understand their Self Assessment tax bills clearly.

We can help you:

• check whether your HMRC bill is correct

• understand why Payments on Account have been added

• calculate whether your Payments on Account can be reduced

• prepare your Self Assessment tax return

• plan your tax payments in advance

• review self-employed profits

• review rental income

• review director dividends and other income

• avoid last-minute surprises

• communicate with HMRC where needed

Our aim is to make tax simple, clear and manageable.

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Final answer: why has my HMRC bill doubled?

Your HMRC bill may look like it has doubled because you are paying:

• the tax still owed for the previous tax year, and

• an advance payment towards the current tax year.

This advance payment is called Payment on Account.

It is not an extra tax, but it can create a cashflow shock if you were not expecting it.

If your income is expected to be lower, the payment may be reduced legally, but this should be done carefully.

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Need help with Payment on Account?

If your HMRC bill looks higher than expected, or you are unsure whether your Payment on Account can be reduced, DCTaxAgent can help.

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Contact us today:

WhatsApp: 07587 532646
Email: contact@dctaxagent.co.uk
Website: www.dctaxagent.co.uk

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DCTaxAgent

Accounting | Tax | Advisory