Payments on Account: When HMRC Makes You Pay for the Next Flight Before You’ve Landed

If you're self-employed or receive untaxed income, you’ve probably come across something called Payments on Account. It might sound like you’re booking a Jet2 holiday in advance — paying a deposit now for something you haven’t even experienced yet — and in a way, that’s exactly what it is. Except instead of a trip to Tenerife, it’s your next tax bill.

Here’s what you need to know to stay in control — no turbulence, no hidden charges (unlike certain airline snacks).

What Are Payments on Account?

Payments on Account are advance payments towards your next year’s tax bill. HMRC expects that if you’ve earned a certain amount this year, you’ll probably earn something similar next year too — so they split your estimated next bill into two chunks and ask you to prepay.

It's like Jet2 assuming you’ll want another sunshine break next year and charging you for it now. Only with HMRC, there’s no sun lounger included.

Who Has to Make Them?

You’ll be asked to make Payments on Account if:

• Your tax bill is more than £1,000

• Less than 80% of your income is taxed at source (e.g. through PAYE)

  
  

If both apply, you’ll be making two payments: one in January and another in July. Each is 50% of your last tax bill(excluding student loan repayments and capital gains).

Let’s say your tax bill for 2023/24 was £2,000. In January 2025, you’d pay:

• £2,000 for 2023/24

• £1,000 as your first payment on account for 2024/25

  
  

Then in July 2025, you'd pay another £1,000.

That’s £4,000 in just a few months — like buying two Jet2 holidays back-to-back and realising your bank account wasn’t ready to fly.

Can You Reduce Your Payments?

Yes — but only if you genuinely expect your income (and tax bill) to be lower next year.

Maybe you’re working fewer hours, had a slow start, or your side hustle’s gone a bit quiet (like a delayed Jet2 departure with no gate announcement). You can apply to reduce your payments on account via your online Self Assessment account or by submitting form SA303.

But be careful: if you reduce them too much and HMRC later finds out you underpaid, you could face interest or penalties — not quite the upgrade you were hoping for.

Top Tips to Avoid a Bumpy Ride

• Budget Ahead:

  • Don’t let January and July sneak up on you. Set aside money regularly — like saving for that annual Jet2 getaway.

• Check Your Tax Bill Carefully:

  • Payments on Account are based on the tax you owe — not student loan payments, Class 2 NICs, or capital gains.

• Reduce If Needed — But Honestly:

  • Only apply to lower your payments if you’re sure your income is going down. Think of it like downgrading your seat — you can, but don’t assume you’ll still get champagne service.

    
    

Final Call

Payments on Account can feel like a nasty surprise — like finding out your Jet2 hand luggage is too big just as you reach the gate. But with the right planning, they’re manageable. Know why you’re paying them, when they’re due, and whether you can adjust them — and your tax journey will stay safely on course.

Because while HMRC might not offer in-flight snacks, avoiding a tax shock is the next best thing to extra legroom.