If you are self‑employed, a freelancer, or someone who receives untaxed income, HMRC may require you to make advance payments towards your tax bill. These are known as Payments on Account.
While many people are aware of the first instalment, the second one often causes confusion. Here is a clear explanation of what the Second Payment on Account means and how it works.
What are Payments on Account?
Payments on Account are advance payments towards your next tax bill. Instead of paying your full tax liability in one lump sum, HMRC splits it into two instalments:
- First Payment on Account – due by 31 January
- Second Payment on Account – due by 31 July
Each payment is normally 50% of your previous year’s tax bill. These payments do not include student loan repayments or capital gains tax.
What is the Second Payment on Account?
The Second Payment on Account is simply the second instalment of your advance tax payments.
Deadline: 31 July each year
Amount: Another 50% of your previous year’s tax bill
Together, your first and second payments on account will usually cover most or all of your tax bill for the current tax year.
Example
If your tax bill for 2023/24 was £4,000, HMRC expects similar earnings for 2024/25.
- First Payment on Account (due 31 January 2025): £2,000
- Second Payment on Account (due 31 July 2025): £2,000
If your actual tax bill ends up higher, you will pay the difference in the following January. If it is lower, you can claim a refund or reduce your payments.
Can you reduce your Second Payment on Account?
Yes. If you know your income is going to be lower this year, you can apply to reduce your Payments on Account through your HMRC account. However, you should be cautious. If you reduce them too much and underpay, HMRC will charge interest on the shortfall.
What happens if you miss the deadline?
If you do not make your second payment on account by 31 July, HMRC will charge interest from the date the payment was due until the date it is paid. Late payment penalties can also apply if the balance remains unpaid after further deadlines.
Do you need help?
Payments on Account can feel confusing, especially if your income varies from year to year. A professional accountant can:
- Help you estimate your tax bill
- Advise on whether to reduce payments
- Ensure you meet deadlines and avoid interest or penalties
If you would like professional advice or someone to handle the calculations for you, get in touch with our team. We can help you plan ahead, stay compliant, and keep your cash flow under control.