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    The 31 July payment on account: why it feels like double tax, and why it isn't

    By TaxKiln on

    Your second payment on account is due 31 July. It is an advance on next year's tax bill, not an extra tax, and the newly self-employed get caught out most.

    You paid HMRC a big bill in January. Work has been steady, maybe even good, and then a letter or a login reminds you that another payment is due on 31 July. If you are fairly new to self-employment, this is usually the moment the panic sets in. It feels like HMRC is taxing you twice. It is not, but almost nobody explains why until it is too late.

    The short version

    • Your second payment on account is due by midnight on 31 July. It is an advance payment towards your next tax bill, not an extra one.
    • Each payment is usually half the tax you owed on your last return. The first half was due on 31 January.
    • You only make payments on account if your last bill was over £1,000 and you paid less than 80% of your tax at source, for example through PAYE on a job.
    • It hits the newly self-employed hardest, because your first January bill already included a full year's tax plus the first instalment of the next.
    • If you are earning less this year you can ask HMRC to reduce the payment. If you cannot pay, interest applies but the 5% late payment penalties do not.

    What the second payment on account actually is

    A payment on account is an advance payment towards your next Self Assessment bill. HMRC splits the estimate in two: one due 31 January, one due 31 July. The July payment is the second half.

    Each payment is usually half the tax you owed on your last return. If last year's bill was £4,000, you paid £2,000 in January and you pay £2,000 in July.

    You are not being taxed twice. You are paying next year's bill early, in two instalments, based on last year's figures. When you file your next return, HMRC compares what you have already paid against what you actually owed and settles the difference. Your real tax position is reconciled then, not now.

    Why it feels like double tax (and why it isn't)

    The resentment makes sense. In January you paid two things at once: the balance of what you owed for your last tax year, plus the first half of the next one. Then July brings the other half, for a return you have not even filed yet.

    So within seven months you have paid roughly one and a half years of tax. Of course it feels like a stitch-up. But it is the same money spread out, not extra tax. The system is trying to stop you facing one enormous bill every January. It just does a poor job of saying so. Knowing when each payment falls is half the battle, and our self-employed tax calendar maps the lot.

    The first-year sting

    Payments on account catch out the newly self-employed more than anyone.

    In your first year you file a return, and the bill is bigger than you expected because it includes your first payment on account on top of the tax you actually owed. Then six months later the second payment lands. Nobody warned you, because in employment the tax just disappears from your payslip and you never see this rhythm.

    The lesson most people learn the hard way: from your first year of trading, set money aside for tax as you earn it, not when the bill arrives. Treat the payment on account as money that was never yours. Getting this wrong is one of the most common tax mistakes the self-employed make.

    Do you actually have to pay it?

    Not everyone does. You make payments on account unless one of these is true:

    • your last Self Assessment bill was less than £1,000, or
    • you paid more than 80% of the tax you owed at source, for example through PAYE if you also have a job.

    If either applies, you are off the hook. If you have a salaried job alongside your self-employment, the way the two are taxed together often means more of your tax is collected through PAYE, which can keep you under the threshold.

    Payments on account cover your Income Tax and Class 4 National Insurance. They do not include anything you owe for Capital Gains Tax or student loans. Those are settled in your January balancing payment.

    Earning less this year? You can reduce it

    Your payment on account is based on last year's profit. If this year is quieter, you could be handing HMRC more than you will owe and waiting months to get it back.

    You can ask HMRC to reduce your payments on account if you expect a lower bill. Sign in to your tax account and choose "Reduce payments on account", or send form SA303.

    One warning, because this is where people get burned: only reduce it if you genuinely expect to owe less. If you cut it too far and you actually owed more, HMRC charges interest on the shortfall from the original due date. Reducing the payment is for a real drop in income, not wishful thinking.

    What happens if you miss 31 July

    You start paying interest from the day after the deadline until you pay in full. As of early 2026 that rate is 7.75%, set at the Bank of England base rate plus 4 percentage points.

    There is one bit of good news: unlike a late tax return, a late payment on account does not trigger the 5% late payment penalties. Interest still runs every day though, and at current rates it adds up. If money is tight, pay what you can and contact HMRC about a Time to Pay arrangement rather than ignoring it. If a demand letter has already arrived, here is how to respond to HMRC without making it worse.

    Common questions

    Is the second payment on account a separate tax?

    No. It is an advance payment towards your next Self Assessment bill, not an extra charge. Each payment is usually half the tax you owed last year. When you file your next return, HMRC offsets what you have already paid against what you actually owe.

    Why is my January bill so much bigger than the tax I owed?

    Because it usually includes your first payment on account on top of your actual bill. In your first year that can mean paying around 150% of your tax in one go: the full year you owe, plus the first half of next year in advance. The 31 July payment is the second half.

    Can I reduce my July payment if I am earning less this year?

    Yes. If you expect to owe less, you can ask HMRC to reduce your payments on account online or with form SA303. Only do it if the drop is real, because reducing it too far means HMRC charges interest on the shortfall.

    What if I cannot afford the 31 July payment?

    Pay what you can and contact HMRC about a Time to Pay arrangement. A late payment on account does not get the 5% penalties a late return does, but interest runs from 1 August until it is cleared.

    Does the payment include my Capital Gains Tax or student loan?

    No. Payments on account cover Income Tax and Class 4 National Insurance only. Capital Gains Tax and student loan repayments are settled in your January balancing payment.

    The bottom line

    The second payment on account is real, it is due by midnight on 31 July, and it is not a mistake. It is built from last year, so it does not always match this year. If your income has genuinely dropped, reduce it. If the figure is right, set the money aside now rather than scrambling on the 30th.

    The deadlines are the easy part to get wrong and the easy part to fix. Our self-employed tax calendar lays out every date that matters across the year, so 31 July never ambushes you again.

    This is general guidance, not tax advice. Your own figures decide what you owe, so check your HMRC account or speak to an accountant before you act.