Payments on Account Calculator United Kingdom

What the payments on account calculator does

The calculator estimates the advance instalments HMRC collects towards your next Self Assessment bill. Enter the Income Tax you owed through Self Assessment last year and any Class 4 National Insurance, and it shows each payment on account and the total for the year, so you can see the demand coming before the letter arrives.

Payments on account catch many people out, especially in their first full year of self-employment, when the January bill can be far larger than expected. Seeing the figure early lets you set money aside in good time.

What payments on account are

HMRC collects tax closer to when you earn it by assuming next year’s income will be similar to last year’s and asking you to pay towards it in advance, in two instalments.

Each payment on account is half of the previous year’s Income Tax and Class 4 National Insurance due through Self Assessment, that is, after tax already deducted at source such as PAYE. If last year’s figure was £5,000, HMRC expects two payments of £2,500 towards the coming year. When the actual bill is known, any difference is settled by a balancing payment, up or down.

The two payment dates

The first instalment is due by 31 January, the same deadline as your Self Assessment return and any balancing payment for the year just ended. The second is due by 31 July.

That is why the January deadline feels so heavy for the newly self-employed. In a first full year you can face the balancing payment for last year and the first payment on account for this year at once, in effect a year and a half of tax on one date.

How the figure is worked out

• It takes the Income Tax you owed through Self Assessment for the previous year.
• It adds your Class 4 National Insurance for that year.
• It halves the total to give each payment on account.
• It shows both instalments and their total.

Because the split is always half and half, the two payments together equal last year’s Self Assessment Income Tax and Class 4 NIC.

What counts and what does not

Only Income Tax and Class 4 National Insurance feed into payments on account. Voluntary Class 2 National Insurance, Capital Gains Tax and student or postgraduate loan repayments are settled in the January balancing payment instead, so do not include them. Including a student loan repayment or a capital gain would overstate the result. Use the Income Tax and Class 4 figures from your last Self Assessment calculation.

When you are exempt

You do not have to make payments on account if your last Self Assessment bill was under £1,000, or if more than 80% of the tax you owed for the year was collected at source, most often through PAYE on employment income alongside self-employment. In that case you pay your bill in full by 31 January. If the calculator shows a large figure but you believe you are exempt, check which rule applies before the deadline.

Reducing your payments on account

If you expect to earn less this year, perhaps because a contract ended or you moved into employment, you can apply to reduce your payments on account so you are not paying tax you will only reclaim later.

If you reduce them too far and your actual bill turns out higher, HMRC charges interest on the shortfall from the original due dates. Look at the standard figure first, reduce only if you are confident your income has fallen, and leave some margin.

When to use this tool

• To budget for the 31 July payment on account.
• To check an HMRC statement against your last bill.
• To understand why your first January Self Assessment bill is so large.
• To decide roughly how much to set aside each month for tax.

This is general information only and not financial advice.

About This Payments on Account Calculator

Use this payments on account calculator to get an instant estimate based on the figures you enter. Adjust the inputs above to match your situation, or browse all our calculators to plan your next step.