Payments on account are prepayments for your tax bill the following year. You need to make two of these payments each year, except if your last self-assessment tax bill was less than £1,000.00 or if you paid more than 80% of the tax bill at source, e.g. PAYE or CIS. Each payment is half of what you paid in taxes in the previous year. The first payment on account is due by 31^st January and is usually paid at the same time as the current year’s tax liability, and the second payment is due by 31^st July. If you still owe tax after making these payments, you must make a balancing payment by 31^st January the following year.

Example:

Your total tax bill for the 2022/23 tax year was £3,000.00. In 2023, you paid £1,800.00 in total towards this through two payments of £900.00.

On 31^st January 2024, you need to make a balancing payment of £1,200.00 for the 2022/23 tax bill (subtracting the £1,800.00 you already paid from the £3,000.00 bill).

You also need to pay the first payment on account towards the 2023/24 tax bill of £1,500.00 which is half of your 2022/23 tax bill (£3,000.00).

Therefore, on 31^st January 2024, the total amount due will be £2,700.00.

Then, on 31^st July 2024, you need to make the second payment of account (£1,500.00).

If you tax bill for the 2023/24 tax year exceeds £3,000.00 (the total of the two payments on account), you’ll need to make a balancing payment by 31^st January 2025.