Self Assessment Payments on Account: 31 July Deadline Explained
The 31 July Self Assessment payment deadline is one of those tax dates that can easily be forgotten.
Most people remember the 31 January deadline because that is when tax returns are due and when the main Self Assessment payment is usually made. But for many taxpayers, January is not the end of the story. There may also be a second payment due by 31 July.
This is known as a payment on account.
Payments on account can feel confusing because they are not always based on what you have actually earned in the current tax year. Instead, they are usually based on your previous year’s tax bill. That means you could be paying tax in advance towards the next year, even before the final profit or income figures are fully known.
For some people, this is a useful way of spreading the cost of tax. For others, especially where income has dropped, it can create cash flow pressure.
So, with the 31 July deadline approaching, it is worth understanding what payments on account are, who needs to make them, and when it may be possible to reduce them.
What are payments on account?
Payments on account are advance payments towards your next Self Assessment tax bill.
They are most common for sole traders, landlords, directors with dividend income, and individuals who receive income that is not fully taxed before they receive it.
For example, if you are employed, most of your tax is usually collected through PAYE. But if you are self-employed, receive rental income, take dividends, or have other untaxed income, HMRC may ask you to make payments on account.
The idea is that instead of paying all of your tax in one lump sum after the tax year has ended, you make two advance payments during the year. One is due on 31 January and the second is due on 31 July.
Why does HMRC ask for them?
HMRC uses payments on account to collect tax closer to when income is earned.
Without them, a sole trader or landlord could earn income throughout the year and only pay the tax many months later. Payments on account are designed to reduce that delay and spread the cost.
The difficulty is that the calculation is normally based on last year’s tax bill. That can work reasonably well if your income is steady from year to year. But it can feel unfair or uncomfortable if your income changes.
For example, if your profit was high last year but much lower this year, HMRC may still expect payments based on the higher year unless the payments are reduced.
How are payments on account calculated?
Each payment on account is usually 50% of your previous year’s tax bill.
So, if your Self Assessment bill for 2024/25 was £10,000, HMRC may ask for two payments on account towards 2025/26:
The first payment would be £5,000, due by 31 January 2026.
The second payment would be £5,000, due by 31 July 2026.
Then, once your actual 2025/26 tax return is completed, HMRC compares the payments already made against the final tax due.
If the payments on account were too low, there will be a balancing payment due by 31 January 2027.
If the payments were too high, you may receive a refund or have the overpayment set against future tax.
This is why January can sometimes feel particularly painful. You may be paying the balance for the previous tax year and the first payment on account for the next tax year at the same time.
Who usually needs to make payments on account?
You usually need to make payments on account if your last Self Assessment tax bill was more than £1,000 and less than 80% of your tax was collected at source, such as through PAYE.
This means payments on account often apply to people with:
Sole trader profits.
Property income.
Dividend income.
Partnership income.
Other untaxed income.
They are not required in every case. If your previous tax bill was £1,000 or less, or if at least 80% of your tax was already collected at source, payments on account may not be needed.
Why the July payment is easy to miss
The January deadline gets a lot of attention because it is linked to the Self Assessment filing deadline. Most taxpayers know that tax returns and payments are due by 31 January.
The July deadline is different. There is no tax return due on 31 July. It is simply a payment deadline.
Because of this, it can be easier to overlook, especially if you do not check your HMRC account regularly or if you assumed everything was dealt with in January.
This is why reviewing your Self Assessment position early can be useful. If you know a July payment is due, you have time to plan for it. If you think the payment is too high, there may still be time to review whether a reduction is appropriate.
Can payments on account be reduced?
Yes, payments on account can be reduced if you expect your tax bill to be lower than the previous year.
This may happen if your business profits have fallen, your rental profit has reduced, your dividend income has dropped, or you are entitled to more tax relief than before.
However, this should not be treated as a way to simply delay paying tax.
The reduction needs to be based on a reasonable estimate of your expected tax liability. If the payments are reduced too far and the final tax bill ends up being higher, HMRC can charge interest on the underpaid amount.
In some cases, reducing payments on account is completely sensible. For example, if a sole trader has lost a major contract, a landlord has had a long void period, or a director has taken lower dividends, the original payments on account may no longer reflect reality.
But it should be reviewed properly rather than guessed.
Why completing your tax return early helps
One of the best ways to avoid surprises is to complete your tax return earlier in the year.
The 2025/26 tax year ended on 5 April 2026. That means the information can already be pulled together. You do not have to wait until January 2027 to know what your tax position looks like.
By preparing the return early, you can see whether the July payment on account is likely to be correct. If income has reduced, you can consider whether the payment should be reduced. If income has increased, you can start planning for the balancing payment due in January.
This is especially useful for sole traders, landlords and directors who want to manage cash flow properly.
Tax planning is much easier when there is time to make decisions. Waiting until January often means there are fewer options available.
The cash flow problem
Payments on account are not necessarily a problem when they are expected. The issue is when they come as a surprise.
A taxpayer might look at their January payment and think their tax is fully dealt with. Then July arrives, and another payment is due.
For businesses and individuals with seasonal income, fluctuating profits, or personal commitments, this can create avoidable pressure.
That is why it is important to treat tax as something that should be reviewed throughout the year, not just once the deadline is approaching.
Final thoughts
Payments on account are a normal part of the Self Assessment system, but they can still cause confusion.
The key point is that they are advance payments towards your next tax bill. They are usually based on the previous year, which means they may not always match your current position.
If your income has reduced, it may be possible to reduce them. If your income has increased, it is worth preparing early so the next January bill does not come as a shock.
The 31 July deadline is a good reminder to check your tax position, review your income, and make sure you are not paying too much or too little.
At GMS Accountants, we help clients understand their Self Assessment position before deadlines become stressful. Whether you are a sole trader, landlord, director, or have other untaxed income, reviewing your tax position early can give you more control and fewer surprises.
