{"id":13564,"date":"2024-12-11T09:00:49","date_gmt":"2024-12-11T09:00:49","guid":{"rendered":"https:\/\/www.sage.com\/en-gb\/blog\/?p=13564"},"modified":"2026-04-16T10:37:57","modified_gmt":"2026-04-16T09:37:57","slug":"what-is-payment-on-account","status":"publish","type":"post","link":"https:\/\/www.sage.com\/en-gb\/blog\/what-is-payment-on-account\/","title":{"rendered":"What is payment on\u00a0account? HMRC&#8217;s advance tax system explained\u00a0"},"content":{"rendered":"<header class=\"entry-header has-dark-background-color entry-header--standard entry-header--has-illustration entry-header--has-illustration--standard\">\n\t<div class=\"container\">\n\t\t<div class=\"entry-header__row row align-center\">\n\t\t\t<div class=\"col col-lg-7 col-xlg-6 entry-header__content\">\n\t\t\t\t\t\t\t<div class=\"component component-single-header\">\n\t\t\t\t\t\t\t\t\t\t<div class=\"entry-header__misc text--subtitle text--uppercase text--small\">\n\t\t\t\t\t\t\t<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/category\/money-matters\/\" class=\"entry-header__link\">Money Matters<\/a>\t\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t<div class=\"entry-title-wrapper\">\n\t\t\t\t\t<h1 class=\"entry-title\">\n\t\t\t\t\t\tWhat is payment on\u00a0account? HMRC&#8217;s advance tax system explained\u00a0\t\t\t\t\t<\/h1>\n\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t\t\t<p class=\"entry-header__description\">\n\t\t\t\t\t\tPayment on account for Self Assessment can be confusing. In this article, we break it down so you can make tax payments with confidence and ease.\t\t\t\t\t<\/p>\n\t\t\t\t\n\t\t\t\t\n\t\t\t\t\n\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n\t\t<div class=\"single-post-details container\">\n\t\t<div class=\"col\">\n\t\t\t<span class=\"posted-on \"><time class=\"entry-date published\" datetime=\"2024-12-11T09:00:49+00:00\">11 December, 2024<\/time><\/span><span class=\"reading-time\"> min read<\/span>\n\t\t<button\n\t\t\ttype=\"button\"\n\t\t\tclass=\"social-share-button button button--icon button--secondary js-social-share-button\"\n\t\t\tdata-share-title=\"What is payment on\u00a0account? HMRC&#8217;s advance tax system explained\u00a0\"\n\t\t\tdata-share-url=\"https:\/\/www.sage.com\/en-gb\/blog\/what-is-payment-on-account\/\"\n\t\t\tdata-share-text=\"Please read this interesting article\"\n\t\t>\n\t\t\t<span class=\"social-share-button__share-label\">Share<\/span>\n\t\t\t<span class=\"social-share-button__copy-label\" hidden>Copy Link<\/span>\n\t\t\t<span class=\"social-share-button__copy-tooltip\" aria-hidden=\"true\" hidden>Copied<\/span>\n\t\t<\/button>\n\n\t\t\t\t<\/div>\n\t<\/div>\n\t<\/header>\n\n\n\n<div class=\"wp-block-post-author has-dark-background-color alignfull\">\n\t<div class=\"container\">\n\t\t<div class=\"col\">\n\t\t\t\t\t\t\t<div class=\"co-authors\">\n\t\t\t\t\t\n\t\t<div class=\"entry-author-wrapper\">\n\t\t\t<a class=\"entry-author\" href=\"https:\/\/www.sage.com\/en-gb\/blog\/author\/esthercooke\/\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"40\" height=\"40\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2021\/04\/Esther-Cooke-350x350.jpg\" class=\"entry-author__image\" alt=\"Esther Cooke\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2021\/04\/Esther-Cooke-350x350.jpg 350w, https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2021\/04\/Esther-Cooke.jpg 500w\" sizes=\"auto, (max-width: 40px) 100vw, 40px\" \/>\t\t\t\t<span class=\"entry-author__name\">Esther Cooke<\/span>\n\t\t\t<\/a>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\t<\/div>\n<\/div>\n\n\n\n<p>Payment on account is HMRC\u2019s system for collecting&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/sage-business-cloud\/accounting\/features\/self-assessment\/\" target=\"_blank\" rel=\"noreferrer noopener\">Self Assessment&nbsp;tax<\/a>&nbsp;in advance. Instead of paying your full tax bill once a year, you make two payments based on your previous year\u2019s bill.&nbsp;<\/p>\n\n\n\n<p>If&nbsp;you\u2019ve&nbsp;received a higher-than-expected tax bill, payment on account is often the reason.&nbsp;<\/p>\n\n\n\n<p>This guide explains exactly what payment on account is, how HMRC calculates it, when the deadlines fall, and what you can do if you think&nbsp;you&#8217;re&nbsp;going to overpay.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-key-takeaways-payment-on-account-explained-nbsp\">Key takeaways: payment on account explained&nbsp;<\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Payment on account means paying your&nbsp;Self Assessment&nbsp;tax in two advance instalments&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Each payment is based on 50% of your previous year\u2019s tax bill&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Payments are due on 31 January and 31 July each year&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You may need to make a balancing payment if your actual tax bill is higher&nbsp;&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li>You can reduce payments if your income drops, but interest may apply\u00a0<\/li>\n<\/ul>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"#gate-b070c479-ac3c-48cf-b77a-f696b6d06d6b\">Get the support you need with your tax returns by downloading your free copy of Get Self Assessment right each time<\/a><\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-is-payment-on-nbsp-account-nbsp\"><strong>What is payment on&nbsp;account?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Payment on account is the system HMRC uses to collect income tax in advance. Instead of paying your entire tax bill in January each year, you make two payments across the year \u2014 each one equal to half of the previous year&#8217;s bill. The idea is that you pay tax closer to when you earn the income, rather than more than a year in arrears.&nbsp;<\/p>\n\n\n\n<p>These advance payments count towards your final bill. When you file your return and HMRC calculates what you&nbsp;actually owe,&nbsp;you&#8217;ll&nbsp;either pay a balancing amount (if you owe more than&nbsp;you&#8217;ve&nbsp;already paid) or receive a refund (if&nbsp;you&#8217;ve&nbsp;paid too much).&nbsp;<\/p>\n\n\n\n<section class=\"wp-block-sage-container is-constrained is-style-jade\"><div class=\"sage-container__inner\">\n<h3 class=\"wp-block-heading\" id=\"h-why-do-i-have-to-pay-nbsp-tax-nbsp-in-advance-nbsp\"><strong>Why do I have to pay&nbsp;tax&nbsp;in advance?<\/strong>&nbsp;<\/h3>\n\n\n\n<p>HMRC requires advance payments to spread tax costs across the year and reduce the risk of large, unexpected bills.&nbsp;HMRC introduced payments on account to spread the collection of tax throughout the year and reduce the risk of large, unpaid bills accumulating. Before&nbsp;self assessment&nbsp;was introduced in 1996\/97, tax was collected differently \u2014 often in a lump sum well after the income had been earned. The advance payment system is designed to keep the tax you owe more in line with when you&nbsp;actually earn&nbsp;the money.&nbsp;<\/p>\n\n\n\n<p>It&#8217;s&nbsp;also worth noting that employees in PAYE employment pay tax in real time through each&nbsp;payslip&nbsp;\u2014 payments on account are, in effect, the self-employed equivalent of that. The system kicks in once your tax bill exceeds \u00a31,000 in&nbsp;a year, and at least 80% of your tax&nbsp;isn&#8217;t&nbsp;already being collected at source through PAYE.&nbsp;<\/p>\n<\/div><\/section>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-who-needs-to-make-payments-on-account-nbsp\"><strong>Who needs to make payments on account?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>You need to make payments on account if your&nbsp;Self Assessment&nbsp;tax bill is over \u00a31,000 and less than 80% of your tax is collected through PAYE.&nbsp;<\/p>\n\n\n\n<p>Payment on account applies&nbsp;mainly to&nbsp;self-employed individuals, landlords, and anyone who completes a&nbsp;Self Assessment&nbsp;tax return.&nbsp;<\/p>\n\n\n\n<p>If your bill is below this threshold, or most of your tax is already deducted at source, you&nbsp;won\u2019t&nbsp;need to make advance payments.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-when-did-payment-on-account-start-nbsp\"><strong>When did payment on account start?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Payment on account was introduced as part of the UK&nbsp;Self Assessment&nbsp;system to&nbsp;modernise&nbsp;how tax is collected from self-employed individuals.&nbsp;<\/p>\n\n\n\n<p>The&nbsp;self-assessment&nbsp;system \u2014 including payments on account \u2014 was introduced in the UK for the 1996\/97 tax year, following changes set out in the Finance Act 1994. The government&#8217;s intention was to&nbsp;modernise&nbsp;how HMRC collected tax from those with more complex financial affairs: the self-employed, landlords, and those with multiple income sources.&nbsp;<\/p>\n\n\n\n<p>The broad structure of the system&nbsp;hasn&#8217;t&nbsp;changed significantly since then, though thresholds and administrative processes have been updated over the years. Making Tax Digital, which rolls out for most sole traders from April 2026, will change how returns are filed \u2014 but the payment on account system itself is expected to continue.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-is-payment-on-account-calculated\"><strong>How is payment on account calculated?<\/strong><\/h2>\n\n\n\n<section class=\"wp-block-sage-container is-constrained is-style-jade\"><div class=\"sage-container__inner\">\n<p>The calculation is straightforward: take your&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/allowable-expenses-self-assessment-tax-return\/\" target=\"_blank\" rel=\"noreferrer noopener\">Self Assessment tax bill from the previous tax year<\/a>&nbsp;and divide it&nbsp;by&nbsp;two. Each of your two payments on account equals half of that figure.&nbsp;<\/p>\n\n\n\n<ol start=\"1\" class=\"wp-block-list\">\n<li>Previous year&#8217;s bill: \u00a33,600&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"2\" class=\"wp-block-list\">\n<li>First payment on account (due 31 January): \u00a31,800&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"3\" class=\"wp-block-list\">\n<li>Second payment on account (due 31 July): \u00a31,800&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"4\" class=\"wp-block-list\">\n<li>Total paid in advance: \u00a33,600&nbsp;<\/li>\n<\/ol>\n\n\n\n<p>If your actual bill for the year turns out to be more than \u00a33,600,&nbsp;you&#8217;ll&nbsp;make a balancing payment. If&nbsp;it&#8217;s&nbsp;less,&nbsp;you&#8217;ll&nbsp;be&nbsp;refunded&nbsp;the difference.&nbsp;<\/p>\n\n\n\n<p>Payments on account apply only to income tax and Class 4 National Insurance. Capital Gains Tax and certain other charges are excluded \u2014 those are paid as part of your balancing payment in January.&nbsp;<\/p>\n<\/div><\/section>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-when-do-you-make-payments-on-account\"><strong>When do you make payments on account?<\/strong><\/h2>\n\n\n\n<p id=\"h-when-do-you-make-payments-on-account\">You make two payments on account each year, with deadlines in January and July.&nbsp;<\/p>\n\n\n\n<p>There are two deadlines each year:&nbsp;<\/p>\n\n\n\n<ol start=\"5\" class=\"wp-block-list\">\n<li><strong>31 January:&nbsp;<\/strong>your&nbsp;first payment on account for the upcoming tax year, plus any balancing payment owed from the previous year.&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"6\" class=\"wp-block-list\">\n<li><strong>31 July:&nbsp;<\/strong>your&nbsp;second payment on account for the current tax year.&nbsp;<\/li>\n<\/ol>\n\n\n\n<p id=\"h-when-do-you-make-payments-on-account\">You&nbsp;don&#8217;t&nbsp;have to make payments on account if your previous year&#8217;s tax bill was less than \u00a31,000, or if at least 80% of your tax is collected through PAYE. If either of those applies to you,&nbsp;you&#8217;ll&nbsp;just pay your full bill in January each year.&nbsp;&nbsp;<\/p>\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">E-Book: Switching from Self Assessment to Making Tax Digital<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p>Worried about following MTD&#8217;s rules in April 2026? This brief yet comprehensive guide explains what you need to know: How you do accounting now, and how you should do it in future.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-3b52a309-fae9-49fa-a235-03fc76c551a0\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Get MTD for Income Tax: A Guide to Switching From Self Assessment<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1215\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2023\/09\/GettyImages-1385092066-1215x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2023\/09\/GettyImages-1385092066-1215x810.jpg 1215w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-payment-on-account-works-in-simple-terms-nbsp\"><strong>How payment on account works in simple terms<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Payment on account is based on your previous year\u2019s tax bill and split into two equal payments. These payments count towards your final bill for the current tax year.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-payment-on-account-example-how-it-works-in-practice-nbsp\"><strong>Payment on account example: how it works in practice<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Say you completed your first&nbsp;Self Assessment&nbsp;return for 2021\/22 and your bill came to \u00a3800. Because it was under \u00a31,000, no payments on account were&nbsp;required&nbsp;for the following year.&nbsp;<\/p>\n\n\n\n<p>The next year, 2022\/23, your profits grew and your bill came to \u00a32,400. Because&nbsp;it&#8217;s&nbsp;now above \u00a31,000, the payment on account process kicks in for 2023\/24:&nbsp;<\/p>\n\n\n\n<ol start=\"7\" class=\"wp-block-list\">\n<li>31 January 2024: pay \u00a32,400 (your 2022\/23 bill) plus \u00a31,200 (first payment on account for 2023\/24)&nbsp;<\/li>\n<\/ol>\n\n\n\n<ol start=\"8\" class=\"wp-block-list\">\n<li>31 July 2024: pay a further \u00a31,200 (second payment on account for 2023\/24)&nbsp;<\/li>\n<\/ol>\n\n\n\n<p>When you file your 2023\/24 return and your actual bill comes to \u00a32,000,&nbsp;you&#8217;ve&nbsp;already paid \u00a32,400 on account \u2014 so HMRC owes you a \u00a3400 refund. Your payments on account for 2024\/25 are then based on the \u00a32,000 bill, so \u00a31,000 each.&nbsp;<\/p>\n\n\n\n<p><strong>Read more on&nbsp;Self Assessment:<\/strong>&nbsp;<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.sage.com\/en-gb\/blog\/get-self-assessment-right-each-time\/\" target=\"_blank\" rel=\"noreferrer noopener\">Free e-book: Get Self Assessment right each time<\/a>&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.sage.com\/en-gb\/blog\/allowable-expenses-self-assessment-tax-return\/\" target=\"_blank\" rel=\"noreferrer noopener\">Tax deductions UK: Allowable expenses you can claim if you\u2019re self-employed<\/a>&nbsp;<\/li>\n<\/ul>\n\n\n\n<ul class=\"wp-block-list\">\n<li><a href=\"https:\/\/www.sage.com\/en-gb\/blog\/file-a-tax-return-online\/\" target=\"_blank\" rel=\"noreferrer noopener\">How to file a Self Assessment tax return online: A step-by-step guide<\/a>&nbsp;<\/li>\n<\/ul>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-do-you-pay-payments-on-account\"><strong>How do you pay payments on account?<\/strong><\/h2>\n\n\n\n<p id=\"h-how-do-you-pay-payments-on-account\">&nbsp;HMRC accepts payment through several methods. For same or next-day processing, you can pay by online banking, CHAPS, or&nbsp;<a href=\"https:\/\/www.gov.uk\/pay-self-assessment-tax-bill\/direct-debit\" target=\"_blank\" rel=\"noreferrer noopener\">debit card<\/a>&nbsp;through the HMRC portal. Personal credit cards&nbsp;aren&#8217;t&nbsp;accepted, but corporate credit cards&nbsp;are.&nbsp;<\/p>\n\n\n\n<p>If you want to spread the payments further,&nbsp;<a href=\"https:\/\/www.gov.uk\/pay-self-assessment-tax-bill\/pay-weekly-monthly\" target=\"_blank\" rel=\"noreferrer noopener\">HMRC&#8217;s Budget Payment Plan<\/a>&nbsp;lets you make regular weekly or monthly payments towards your bill throughout the year. The amounts&nbsp;you&#8217;ve&nbsp;paid are credited&nbsp;against&nbsp;your next bill. This works well for people who find it easier to budget in smaller, regular amounts rather than two large payments.&nbsp;<\/p>\n\n\n\n<p id=\"h-how-do-you-pay-payments-on-account\">Setting up a direct debit with HMRC is another&nbsp;option&nbsp;\u2014&nbsp;they&#8217;ll&nbsp;tell you the amount and date in advance. Allow five working days for a direct debit to process the first time you set one up.&nbsp;<\/p>\n\n\n\n<div class=\"wp-block-buttons is-layout-flex wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"#gate-b070c479-ac3c-48cf-b77a-f696b6d06d6b\">Get the support you need with your tax returns by downloading your free copy of Get Self Assessment right each time<\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-happens-if-you-nbsp-don-t-nbsp-pay-payments-on-account-nbsp\"><strong>What happens if you&nbsp;don\u2019t&nbsp;pay payments on account?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>If you miss a&nbsp;payment on account&nbsp;deadline, HMRC may charge interest on the outstanding amount and apply penalties depending on how late the payment is.&nbsp;<\/p>\n\n\n\n<p>Paying on time is important to avoid&nbsp;additional&nbsp;costs and disruption to your tax account.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-reduce-payments-on-account-nbsp\"><strong>How to reduce payments on account<\/strong>&nbsp;<\/h2>\n\n\n\n<p>All business&nbsp;income&nbsp;can fluctuate from year to year.&nbsp;<\/p>\n\n\n\n<p>If you know your tax bill is going to be lower than the previous year, say for example you have fewer clients or your tax relief has gone up, you&nbsp;can avoid overpaying tax by asking HMRC to reduce your payments on account.&nbsp;<\/p>\n\n\n\n<p>You can choose to do this online or by&nbsp;post.&nbsp;<\/p>\n\n\n\n<p>To do this online, sign into&nbsp;your&nbsp;<a href=\"https:\/\/www.tax.service.gov.uk\/gg\/sign-in?continue=\/account\/&amp;origin=SA-frontend\" target=\"_blank\" rel=\"noreferrer noopener\">online account<\/a>. Select the&nbsp;option&nbsp;to view your latest&nbsp;<a href=\"https:\/\/www.sage.com\/en-gb\/blog\/file-a-tax-return-online\/\" target=\"_blank\" rel=\"noreferrer noopener\">Self Assessment return<\/a>, and then select \u2018reduce payments on account\u2019.&nbsp;<\/p>\n\n\n\n<p>To apply by post, fill out the&nbsp;<a href=\"https:\/\/www.gov.uk\/government\/publications\/self-assessment-claim-to-reduce-payments-on-account-sa303\" target=\"_blank\" rel=\"noreferrer noopener\">SA303 form<\/a>&nbsp;on screen, print it, and&nbsp;send&nbsp;to the tax office.&nbsp;<\/p>\n\n\n\n<p>Do think carefully before you reduce your payment on account because if it turns out&nbsp;you\u2019ve&nbsp;underpaid,&nbsp;you\u2019ll&nbsp;have to pay interest on the outstanding amount, which can increase your tax bill significantly.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-what-if-nbsp-you-ve-nbsp-overpaid-nbsp\"><strong>What if&nbsp;you&#8217;ve&nbsp;overpaid?<\/strong>&nbsp;<\/h2>\n\n\n\n<p>If&nbsp;you\u2019ve&nbsp;paid too much tax through payments on account, HMRC will either refund the difference or apply it to your next bill.&nbsp;<\/p>\n\n\n\n<p>If your actual tax bill is lower than the amounts&nbsp;you&#8217;ve&nbsp;paid on account, HMRC will show a credit on your account when you file your return. You can choose to have this refunded \u2014 by bank transfer or cheque \u2014 or leave it as a credit towards your next payment on account.&nbsp;<\/p>\n\n\n\n<p>The refund process happens automatically once your return is processed. If&nbsp;you&#8217;re&nbsp;expecting a refund and it&nbsp;hasn&#8217;t&nbsp;appeared after a few weeks, you can check the status through your HMRC online account.&nbsp;<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"h-how-to-plan-for-payments-on-account-and-avoid-surprises-nbsp\"><strong>How to plan for payments on account and avoid surprises<\/strong>&nbsp;<\/h2>\n\n\n\n<p>Payment on account catches a lot of people off guard the first time they&nbsp;encounter&nbsp;it \u2014 particularly the January bill, which can feel like being asked to pay for two tax years at once. The best&nbsp;defence&nbsp;is to know&nbsp;it&#8217;s&nbsp;coming and set money aside throughout the year.&nbsp;<\/p>\n\n\n\n<p>A rough rule of thumb: if&nbsp;you&#8217;re&nbsp;self-employed and your profits are growing, set aside around 25\u201330% of your net&nbsp;profit&nbsp;tax. That covers income tax, National Insurance, and gives you a buffer for the payments on account. Once&nbsp;you&#8217;ve&nbsp;been through the cycle once or twice, it becomes much easier to&nbsp;anticipate.&nbsp;<\/p>\n\n\n\n<p>If&nbsp;you&#8217;re&nbsp;working with an accountant, ask them to give you a forecast of your payment on account at the start of each tax year \u2014 it should be one of the first things they calculate once your&nbsp;previous&nbsp;return is done.&nbsp;<\/p>\n\n\n\n<p><em>Editor&#8217;s note: This article was first published in January 2023 and has been updated for relevance.<\/em><\/p>\n\n\n\n\n\n\n<div class=\"single-cta gated-content\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">E-Book: Get Self Assessment right<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p><!-- wp:paragraph --><\/p>\n<p class=\"\">Download your free copy of this essential guide and get the support you need with your Self Assessment tax returns.<\/p>\n<p><!-- \/wp:paragraph --><\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b070c479-ac3c-48cf-b77a-f696b6d06d6b\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Download your free guide<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t\t\t<div class=\"single-cta__downloads\">\n\t\t\t\t\t\n\t\t\t\t\t1,200 readers have downloaded this guide\t\t\t\t<\/div>\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1146164056-1440x810.jpg\" class=\"single-cta__image\" alt=\"Woman applying for business credit line\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1146164056-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n\n\n\n<div class=\"single-cta\">\n\t<div class=\"single-cta__positioner\">\n\t\t<div class=\"single-cta__wrapper has-dark-background-color\">\n\t\t\t<div class=\"single-cta__content\">\n\t\t\t\t\t\t\t\t<h2 class=\"single-cta__title h3\">Subscribe to the Sage Advice newsletter<\/h2>\n\n\t\t\t\t\t\t\t\t\t<div class=\"single-cta__description\">\n\t\t\t\t\t\t<p>Join more than 500,000 UK readers and get the best business admin strategies and tactics, as well as actionable advice to help your company thrive, in your inbox every month.<\/p>\n\t\t\t\t\t<\/div>\n\t\t\t\t\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t<a\n\t\t\t\t\t\thref=\"#gate-b1a63862-3fa0-4a5e-bb67-c76b88bbc6b8\"\n\t\t\t\t\t\tclass=\"single-cta__button button button--primary\"\n\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t\t>Subscribe now<\/a>\n\t\t\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<\/div>\n\n\t\t\t\t\t<img decoding=\"async\" width=\"1440\" height=\"810\" src=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg\" class=\"single-cta__image\" alt=\"\" loading=\"lazy\" srcset=\"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-1073797282-1-1440x810.jpg 1440w\" sizes=\"auto, (min-width: 48em) 33vw, 100vw\" \/>\t\t\t<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>Payment on account for Self Assessment can be confusing. In this article, we break it down so you can make tax payments with confidence and ease.<\/p>\n","protected":false},"author":1233,"featured_media":11563,"menu_order":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_sage_video":false,"post_featured_image_hide":false,"sage_hide_published_date":false,"sage_hide_read_time":false,"sage_hide_share_buttons":false,"footnotes":""},"categories":[6],"tags":[23,135,206,27],"business_type":[4],"lilypad":[],"context":[],"industry":[],"persona":[73,74,75],"imagine_tag":[289,287,170,109],"coauthors":[372],"class_list":["post-13564","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-money-matters","tag-bookkeeping","tag-business-finances","tag-need-to-know","tag-tax","business_type-small-business"],"sage_meta":{"region":"en-gb","author_name":"Esther Cooke","featured_image":"https:\/\/www.sage.com\/en-gb\/blog\/wp-content\/uploads\/sites\/10\/2022\/04\/GettyImages-187920071.jpg","imagine_tags":{"289":"Accounting and Payroll","287":"Accounting Individual","170":"Self Assessment","109":"Small business"}},"distributor_meta":false,"distributor_terms":false,"distributor_media":false,"distributor_original_site_name":"Sage Advice UK","distributor_original_site_url":"https:\/\/www.sage.com\/en-gb\/blog","push-errors":false,"_links":{"self":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/13564","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/users\/1233"}],"replies":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/comments?post=13564"}],"version-history":[{"count":5,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/13564\/revisions"}],"predecessor-version":[{"id":29582,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/posts\/13564\/revisions\/29582"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media\/11563"}],"wp:attachment":[{"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/media?parent=13564"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/categories?post=13564"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/tags?post=13564"},{"taxonomy":"business_type","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/business_type?post=13564"},{"taxonomy":"lilypad","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/lilypad?post=13564"},{"taxonomy":"context","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/context?post=13564"},{"taxonomy":"industry","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/industry?post=13564"},{"taxonomy":"persona","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/persona?post=13564"},{"taxonomy":"imagine_tag","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/imagine_tag?post=13564"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/www.sage.com\/en-gb\/blog\/api\/wp\/v2\/coauthors?post=13564"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}