Why do I have to make payments on account?

If your self assessment tax liability for a tax year is over £1,000, and less than 80% of your tax is collected at source (e.g. PAYE), you will be required to pay two payments on account towards the following tax year. Each payment on account is calculated at 50% of your tax liability. The first payment is due by 31st January – the same date the tax return and balancing payment are due. The second payment on account is due by 31st July.

If you think your tax liability will be less in the following tax year, you can apply to reduce your payments on account. However, interest and potentially penalties could be payable if you reduce the payments on account too much.