What are payments on account?
Advance payments toward next year's tax bill, due if this year's bill is £1,000 or more - which is why a first January bill can be 150% of what you expected.
Last checked 12/09/2026.
If your Self Assessment bill is £1,000 or more, HMRC asks you to pay toward the following year in advance, in two instalments of half the current bill each.
The first year it applies is the one that catches people. Say your bill is £2,000. On 31 January you pay that £2,000 plus £1,000 as the first payment on account - £3,000. Then another £1,000 on 31 July. A driver who budgeted £2,000 is £1,000 short in the month with the least work in it.
It is not an extra tax. You are paying next year's bill early, and it is credited against it. But it is a real cash-flow problem the first time, and the fix is knowing it is coming.
If you know your next year will be much smaller - you stopped driving, or went part time - you can ask HMRC to reduce your payments on account. Reduce them too far and they charge interest on the shortfall. Understand your Self Assessment bill (opens in a new tab).
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