Payments on Account Calculator
Calculate your self-assessment January and July advance payments — and model a POA reduction if your income has fallen.
Last updated: March 2026
Self-Assessment Payment on Account Calculator 2026
Calculate January and July POAs based on your prior year tax liability
Prior Year Tax Liability
Reduction Estimate (Optional)
Payments on Account — Key Deadlines
| Date | What Is Due |
|---|---|
| 31 January 2026 | 1st POA for 2025/26 + balancing payment for 2024/25 |
| 31 July 2026 | 2nd POA for 2025/26 |
| 31 January 2027 | 1st POA for 2026/27 + balancing payment for 2025/26 |
| 31 July 2027 | 2nd POA for 2026/27 |
Expert Guide: Self-Assessment Payments on Account
1. How the Payments on Account System Works
The payments on account (POA) system requires self-assessment taxpayers to pay their income tax in advance, based on the previous year's liability. HMRC's rationale: employed people have tax deducted monthly via PAYE; self-employed and those with investment income need a mechanism to spread their tax liability so they are not hit with a huge bill every January. The two POAs each represent 50% of the prior year's tax and Class 4 NIC liability. When the actual tax return is filed and the exact liability calculated, a balancing payment (or refund) adjusts the difference.
Example timeline (sole trader, 2024/25 tax year): By 31 January 2025: pays 1st POA based on 2023/24 liability. By 31 July 2025: pays 2nd POA (same amount). By 31 January 2026: files 2024/25 return, pays balancing payment (actual 2024/25 liability − 2 POAs already paid), AND pays 1st POA for 2025/26 (50% of 2024/25 liability). The January payment is typically the largest annual payment — often combining a balancing payment for the year just ended and the first advance payment for the new year.
2. When POAs Are NOT Required — The Two Conditions
Payments on account are NOT required if either of these conditions is met: Condition 1: Your total Self Assessment liability (income tax + Class 4 NIC) for the previous year is £1,000 or less. Condition 2: 80% or more of your total tax liability was collected at source via PAYE (i.e. 80%+ was deducted from your salary, pension, or other PAYE-taxed income).
If your SA liability is, say, £900 — no POAs required regardless of PAYE collection. If your liability is £5,000 but £4,200 (84%) was collected via PAYE — no POAs required because the PAYE percentage exceeds 80%. The PAYE threshold matters for company directors who take salary via PAYE but also have dividend or rental income. If their PAYE tax covers >80% of total liability, POAs are not required. In the year you first become self-employed, your liability is entirely new — no POAs apply in year 1 (since there is no prior year liability). From year 2 onwards, POAs begin.
3. Reducing Payments on Account — Form SA303
If you expect this year's tax liability to be lower than last year's (e.g. due to reduced trading income, more expenses, pension contributions, or stopping self-employment), you can apply to reduce your POAs using form SA303. This is submitted to HMRC online (via your Self Assessment account) or by post. You state the amount you expect your actual liability to be. HMRC then reduces both the January and July POAs proportionally.
Risk of reducing: If your estimate is wrong and your actual liability is higher than you stated, HMRC charges interest (Bank of England base rate + 2.5%) on the underpaid POAs from the original due date to the date of payment. In 2026, this is approximately 7.0% per annum. There is no fixed penalty for an incorrect reduction claim — only interest. If you are genuinely unsure whether income will be lower, it is usually cash-flow sensible to reduce anyway and pay any interest that arises, rather than overpaying throughout the year. The interest rate, though significant, is generally less than short-term business borrowing costs.
4. What Is Excluded from POA Calculations
The following are NOT included in the POA calculation and must instead be paid as part of the January balancing payment: Capital Gains Tax: All CGT is due 31 January (unless you already reported and paid within 60 days for UK residential property disposals — in which case that amount is credited and not double-counted). Student loan repayments (Plans 1, 2, 4, Postgraduate): These follow the SA liability but are not included in POAs — they are paid in full via the balancing payment. Class 2 NIC: (£3.45/week for 2025/26 if profits exceed small profits threshold) — this is paid via the January balancing payment, not as a POA.
High Income Child Benefit Charge (HICBC): This IS included in the POA calculation — it is part of the income tax liability for SA purposes. If your income fluctuates around the £60,000 threshold, consider whether you should reduce your POA in years when income may be below the threshold. Pension Annual Allowance charge: If you have exceeded your pension annual allowance and face a charge, this is assessed via SA but is NOT included in POAs — it forms part of the January balancing payment only. This is important for high earners with carry-forward pension contributions.
5. Interest and Penalties for Late Payment
HMRC charges interest on all late tax payments at the Bank of England base rate + 2.5%. As of March 2026, with the BoE rate at 4.5%, the HMRC interest rate is approximately 7.0% per annum. Interest runs from the day after the payment is due. There is no de minimis threshold — even a few days late attracts interest. Late payment interest is not a penalty and cannot be appealed unless the underlying payment obligation is disputed.
Late payment surcharges (balancing payments only, 31 January): In addition to interest, if the balancing payment is unpaid 30 days after the 31 January deadline, a 5% surcharge is added. A further 5% surcharge applies at 6 months (31 July), and another 5% at 12 months (31 January following). These surcharges are on the outstanding tax — not on the interest. Example: £5,000 balancing payment unpaid at 6 months. Surcharge: 2 × 5% = £500, plus 6 months' interest at 7% = £175. Total cost of being 6 months late: £675. Note: surcharges only apply to the January balancing payment — NOT to the July POA (which incurs interest only).
6. First Year in Self-Assessment — No POAs in Year 1
When you first register for Self Assessment and complete your first return, no payments on account have been made during the year. Your entire first-year liability is collected as a single payment on 31 January following the tax year. However, HMRC simultaneously uses that first return to calculate your first POAs — so in January of your second year, you face a "double hit": the balancing payment for year 1 (if any) plus the first POA for year 2 (50% of year 1's liability) plus the second POA due in July.
This can create a significant cash flow shock for new self-employed individuals in their second year of trading. Many accountants recommend setting aside 30-35% of net income from day one to cover these payments. Practical tip: If you start self-employment part-way through a tax year (e.g. September 2025), your first tax return covers only part of the year — reducing the year 1 liability and thus the year 2 POAs. If your first full year is the bigger income year, the POA uplift hits harder. Plan ahead and consider making a "budget payment" to HMRC via your online account to spread the cost voluntarily.
7. HMRC Time to Pay — If You Cannot Pay on Time
If you cannot pay your tax bill by the deadline, HMRC's Time to Pay (TTP) service allows you to arrange a structured payment plan. You can apply online (for bills up to £30,000, if your return is filed and no existing TTP plans exist) or by calling the HMRC payment helpline (0300 200 3822). Interest continues to accrue during a TTP arrangement at the standard rate, but late payment surcharges are not added if the TTP is agreed before they fall due.
How to apply: You must have filed your tax return before applying. HMRC assesses your income and expenditure and typically allows 12 months. For larger debts, direct negotiation may be needed. Budget Payment Plans: You can voluntarily pay HMRC in advance via a Budget Payment Plan (set up via your HMRC online account) — making regular payments throughout the year so you have a credit balance when January arrives. This avoids the cash flow shock of a large January payment and earns no interest from HMRC (it is simply a credit on your account). HMRC will apply the credit against your POAs and balancing payment when they fall due.
Expert Reviewed — This calculator reflects HMRC's payments on account rules and 2026 interest rates. Last verified: March 2026.
Pro Tips for Accurate Results
- Use your SA302 (HMRC tax calculation) for the prior year — not your accountant's estimate
- Exclude CGT, student loan repayments, and Class 2 NIC from the prior year liability figure
- The January payment includes both a new POA AND any balancing payment from the prior year
- Use the reduction tool if your income has genuinely fallen — saves cash flow now
Common Questions
Does my employer tax affect my POAs?
Yes — if 80%+ of your total tax bill is collected via PAYE from your employer, POAs do not apply. Only the unPAYE'd portion creates POAs.
What if I get a tax refund — are POAs refunded?
If your actual liability is less than your POAs, HMRC refunds the overpayment. You can request this refund or leave it as a credit toward future POAs.
People Also Ask
Worked Examples: Payments on Account
Example 1: Standard Sole Trader POA Schedule
Tom (freelance designer) had a 2024/25 tax bill of £9,600 (income tax + Class 4 NIC, no PAYE income). His payments:
- 31 January 2026: 1st POA = £4,800 + 2024/25 balancing payment (if any)
- 31 July 2026: 2nd POA = £4,800
- 31 January 2027: 2025/26 balancing payment + new POAs based on 2025/26 liability
- Cash flow tip: Set aside £800/month (£9,600 ÷ 12) throughout the year
Example 2: POA Reduction via SA303
Jenny's 2024/25 liability was £12,000. In 2025/26 she expects to earn less and estimates a £7,000 liability. She files SA303.
- Standard POAs: £6,000 × 2 = £12,000
- Reduced POAs: £3,500 × 2 = £7,000
- Cash flow saving: £5,000 (deferred to January balancing payment)
- If actual liability turns out to be £8,000: HMRC charges interest on £500 (underpaid) from each due date
Sources & Methodology
- HMRC – Payments on Account
- HMRC – Reduce Payments on Account (SA303)
- HMRC – Interest Rates for Late Payments
Disclaimer: This calculator provides estimates based on HMRC published rules for payments on account. Your actual POA amounts should be confirmed from your Self Assessment return or HMRC's own calculation. Interest rates are subject to change with Bank of England base rate adjustments.