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Self Assessment Payments on Account

HMRC may ask you to make an upfront contribution to next year's tax bill when submitting your self assessment for the last tax year.  This is called a "payment on account".


Why do I have to make a payment on account?

By the time you make a payment for the last tax year (Jan 31st) you are already near the end of the current tax year.  HMRC therefor ask you to make a contribution to the current tax year at the same time as paying the bill for the last tax year.

The affect of this is that your first self assessment bill is higher than all subsequent bills (all else being equal).  For future years, by the time the self assessment is complete you will have already made a payment on account, thus reducing what is then due.


How does HMRC calculate what payment on account I should make?

HMRC assumes that your tax bill will be the same for the following year and so they request 50% of last year's bill by the 31st Jan and the rest in July.


My tax bill will not be so high next year so the payment on account will be correct.

If you disagree with HMRC's estimate of next year's tax you can apply to have the payment on account removed or reduced at the time of submitting the Self Assessment.

If, however, it turns out you were wrong and your tax bill did not reduce as indicated then HMRC will charge interest on the amount that the payment on account should have been and possibly a fine.


Is a payment on account not HMRCs way of making me pay my tax early?

HMRC would like tax paid as early as possible and the payment on account means they do not need to wait until Jan, for the tax year that ended last April. HMRC would suggest that a payment on account is not 'early', it's just not 10 months late as it would be if paid in Jan.