Payments on Account in July: Explained Clearly
- Kieran Thwaites
- Jun 23
- 3 min read
July can often bring confusion and surprise for UK taxpayers dealing with payments on account. Following on from our recent blog post on Making Tax Digital for Income Tax Self-Assessment and what that will mean for you as a Self Assessment tax payer, this next guide in our series we'll clearly explain what payments on account are, who needs to make these payments, how they're calculated, and provide straightforward worked examples to make it simple to understand. Read on to find out more…
💡 What are Payments on Account?
Payments on account are advance payments towards your following annual Self Assessment tax liability, based on your tax bill for the previous year. They are part of a system designed by HMRC to help taxpayers spread their tax bill, avoiding one large payment in January, by making an interim payment at the halfway point of the year, in July. As such, Payments on account are split into two equal installments due by 31st January and 31st July each tax year.
👥 Who needs to make Payments on Account in July?
You are required to make payments on account in July if:
Your previous year's Self Assessment tax bill was more than £1,000, and;
Less than 80% of your tax liability was collected at source (e.g., through PAYE).
If these conditions apply, you can expect and plan to make payments on account.
🧮 How are Payments on Account Calculated?
Your July on account payment is typically half your previous year’s total Self Assessment tax liability, excluding Capital Gains Tax and any Student Loan repayments.
📝 Worked Example of Payments on Account:
Scenario:
Your tax bill for the 2023/24 tax year was £4,000.
You’ve paid your first payment on account of £2,000 by 31st January 2025.
Your July payment on account:
The second payment on account, due by 31 July 2025, is £2,000.
Thus, your £4,000 tax liability for 2023/24 is split evenly across two payments.
🔄 Adjusting Your Payments on Account if Income Changes
If your income significantly decreases for the current tax year (2024/25), you can request HMRC to reduce your payments on account.
📝 Example of Reduced Payments:
Suppose your income in 2024/25 drops substantially, reducing your estimated tax liability to £2,000.
You should:
Notify HMRC to request a payment reduction as soon as possible.
Adjust your payments accordingly to avoid unnecessarily overpaying.
In this example, if HMRC approved the request, the payments would reduce as follows:
Your January 2025 payment becomes £1,000.
Your July 2025 payment also becomes £1,000.
⚠️ Consequences of Missing Your Payments on Account in July
Missing your July Payment on Account deadline can have serious financial consequences. Failure to pay by the 31st July deadline results in immediate interest charges by HMRC on the unpaid amount. Continuous delays could lead to further penalties.
💳 How to Make Your Payments on Account
Payments on account can conveniently be made through four different options:
Online banking
Debit or credit card
HMRC’s online payment portal
Direct Debit (set up in advance)
Ensure you include your Unique Taxpayer Reference (UTR) as a payment reference, so HMRC can allocate your payment against your account and balance.
📌 Planning Your Payments on Account Effectively
Planning ahead and budgeting effectively can alleviate stress associated with tax payments. Regularly reviewing your income and maintaining accurate records helps avoid unexpected financial strain.
The team here at ASBA can calculate your potential tax liability and advise if it’s possible for you to reduce your payments on account, giving you peace of mind of what’s ahead and time to plan.
If you have concerns or need tailored advice, consulting a professional accountant such as ASBA Accounting is strongly recommended, as mistakes can have financial repercussions and can be easily avoided, just give us a call on 01293 525656. 📞
📖 Summary: Prepare for Your Payments on Account
Understanding your payments on account clearly is key to effectively managing your tax liabilities. Adjust your payments promptly if your financial situation changes to avoid unnecessary penalties.
For further assistance with your tax planning, contact our expert team at ASBA Accounting - we’re committed to supporting you.
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