The short version
- Payments on account are advance payments towards next year's tax, made in two halves: by 31 January and by 31 July.
- Each one is usually half of last year's Self Assessment bill (Income Tax plus Class 4 National Insurance).
- In your first year, 31 January means paying the whole year's bill and the first half for next year. That's the shock.
- You don't make them if your bill was under £1,000, or if more than 80% of your tax was already taken through PAYE.
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Who has to make payments on account?
HMRC asks for them when your Self Assessment bill is £1,000 or more, unless more than 80% of the tax you owed for the year was collected another way, such as through your tax code at work or tax taken off savings interest.
That's why plenty of side-hustlers never meet them. Someone on a salary who makes a few thousand pounds profit selling online usually owes a few hundred pounds through Self Assessment: under £1,000, so they just pay the bill each January.
Three examples
Illustrative, using 2025/26 rates (England, Wales and Northern Ireland):
- Kerry: salary plus a small reselling side hustle. £28,000 salary, £3,228 profit from eBay. Her Self Assessment bill is about £645.60 (20% of the profit; no Class 4 because her profit is under £12,570). It's under £1,000, so no payments on account. She pays £645.60 by 31 January 2027 and that's it.
- Priya: salary plus a busy side hustle, first year. £28,000 salary, £9,000 profit selling on Facebook Marketplace and Etsy. Her bill is about £1,800. Her employer took about £3,086 through PAYE, so Self Assessment is about 37% of her total tax: well under the 80% line, so payments on account apply. By 31 January 2027 she pays £1,800 + £900 = £2,700, then £900 by 31 July 2027.
- Marcus: full-time seller, first year. No other income, £22,000 profit. His bill is about £2,451.80 (£1,886 Income Tax plus £565.80 Class 4). By 31 January 2027 he pays £2,451.80 + £1,225.90 = £3,677.70, then £1,225.90 by 31 July 2027. If his 2026/27 bill is the same, in January 2028 he only pays the next £1,225.90: the two payments he's already made cover the year.
How it evens out
After the first year, each 31 January payment is made of two parts:
- the balancing payment: last year's real bill minus the payments on account you already made towards it (plus any Capital Gains Tax or student loan repayments), and
- the first payment on account for the current year: half of last year's bill.
gov.uk's own example: a £3,000 bill, with £1,800 already paid on account. January is £1,200 balancing plus £1,500 on account = £2,700, then £1,500 in July. If your profits keep rising, you keep paying a little "catch-up" each January. If they fall, the payments you made can come to more than your bill, and HMRC sets the difference against what you owe next or repays it.
Can I reduce them?
Yes, if you expect this year's bill to be lower than last year's: your profits dropped, you stopped selling, or more tax is being taken through your tax code. You can ask HMRC to reduce them in your online account or with form SA303, by 31 January after the end of the tax year.
Be realistic. If you reduce them and your real bill turns out higher, HMRC charges interest on the shortfall (late payment interest is the Bank of England base rate plus 4%).
Getting ready for January
- Set money aside as you sell. If you're likely to cross £1,000, put away about 30% of each month's profit in your first year, so the 1.5× bill isn't a surprise. (A rule of thumb, not a calculation: your real rate depends on your income.)
- File early. You can file from 6 April. Filing in spring doesn't make the tax due any sooner, but it tells you the January figure months ahead.
- Can't pay it all? Contact HMRC before the deadline. You may be able to set up a payment plan: see if you can't pay your tax bill on time. Our late penalties guide covers what missing the deadline costs.
- Keep dated records. Your bill is only as good as your figures. A free spreadsheet you set up yourself works fine. If you sell on eBay, Vinted, Etsy or Depop, our bookkeeping spreadsheet (£12.99) works out each sale's fees and totals your tax year. It's made by the same people as this calculator, and it's optional.
New to Self Assessment? Start with our guides to registering, tax on Vinted and tax on eBay.