If you’ve recently become self-employed or started earning rental income, Self Assessment can feel confusing at first. It’s often one of those things you know you should understand properly, but it’s easy to put off until the deadline is looming.
Questions like When do I pay? Why is January so costly? What are “payments on account”? are very common, especially for first-time filers.
In this article, we explain how Self Assessment payments work, highlight the key deadlines, and share some practical tips to help you stay in control and avoid unexpected bills.
How Self Assessment payments work
Once you submit your tax return, HMRC calculates the tax due on income that isn’t taxed through PAYE. Unlike employment income, nothing is deducted automatically. You are responsible for paying the bill yourself. This makes understanding the payment system especially important.
Most taxpayers will make two main types of payments each year:
1. Payments on account
These are advance payments towards your next tax bill. If your annual tax liability is more than £1,000, HMRC will usually ask you to make two equal instalments:
- One due on 31 January
- One due on 31 July
These act like a deposit towards the following year’s tax.
2. Balancing payment
Once your tax return has been finalised, any remaining amount you owe is known as the balancing payment. This is due by 31 January after the end of the tax year.
An example
Let’s say your tax bill for 2023/24 was £3,000. You would normally pay:
- £1,500 on 31 January 2025
- £1,500 on 31 July 2025
These are your payments on account.
If your 2024/25 tax bill turns out to be £3,200, you would then pay:
- £200 as a balancing payment on 31 January 2026
- £1,600 as your first payment on account for the following year
This means a total payment of £1,800 in January 2026.
What happens in your first year?
If you’re new to Self Assessment, you usually won’t have made any payments on account yet. This means your first January payment can feel particularly large.
For example, if your first tax bill is £3,200, you would pay:
- £3,200 for the year just ended
- £1,600 towards the next year
That’s a total of £4,800 in one go — which explains why January often feels so expensive for new taxpayers.
How to make your payment
Paying your tax is straightforward once you know how.
Most people now pay online through their HMRC account, using:
- Bank transfer
- Debit card
- The HMRC app
- Online or mobile banking
You’ll just need the correct reference number to ensure your payment is allocated properly.
Avoiding unwelcome surprises
Missing deadlines can lead to penalties and interest, so a little forward planning goes a long way.
Some simple steps that can help include:
- Setting calendar reminders for January and July
- Putting aside money for tax each month
- Keeping your records up to date
Having a separate savings pot for tax can make payments far less stressful when they fall due.
If you’d like help completing your tax return, understanding your payments, or planning ahead, please get in touch. We’re always happy to support you.
e: office@londonaccountants.co t: 0203 137 9791
Kind Regards,
The Team at London Accountants
