For a lot of UK sole traders and other Self Assessment tax payers, 31 July is a date that carries the actual financial weight. It is the deadline for the second payment on account of the tax year. It is a prepayment towards a bill that is not due to be finalized until the next January. If you are looking at the deadline and thinking how you will cover it, then you are not alone and you have got options.
This article discusses exactly what the payment on account 31 July deadline implies and why HMRC collects tax according to this. Also most importantly what to do if you actually cannot pay on time.
What Is a Payment on Account?
A payment on account is a prepayment towards your next Self Assessment tax bill. Instead of asking you to settle an entire year’s tax liability in one go, HMRC categorises your estimated bill into two equal instalments where each instalment is based on 50% of your previous year’s tax liability. This does not include Capital Gains Tax and Student Loan Repayments.
You are needed to make payments on account if both of the following apply:
- Your last Self Assessment tax bill was more than £1,000.
- Less than 80% of the tax you owed was already collected at source, for example through PAYE.
If either condition isn’t met, you simply pay your bill in full by 31 January and payments on account don’t apply to you.
Key Dates: When Payments on Account Are Due
| Item | First Payment on Account | Second Payment on Account |
| Due date | 31 January (during the tax year) | 31 July (after the tax year ends) |
| Amount | 50% of previous year’s tax bill | 50% of previous year’s tax bill |
| Paid alongside | Any balancing payment from the prior year | Nothing else. No return or filing is due on this date |
Why Is the Payment on Account 31 July Deadline So Important?
The payment on account 31 July deadline matters because, unlike the January deadline, there’s no tax return to file alongside it, just a payment. That makes it easy to lose track of, especially for anyone new to Self Assessment. But the obligation is just as real. If your 2025/26 income looks similar to the year before, you’re expected to pay the second instalment even if you haven’t yet filed your latest return. Missing it doesn’t trigger an instant penalty, but it does start the interest clock running from 1 August.
What If Your Income Has Fallen? You Can Ask HMRC to Reduce It
If you believe your income for the current tax year will be lower than the year HMRC based your payments on, you don’t have to pay the full estimated amount. You can apply to reduce your payments on account, either when filing your return online or by submitting form SA303 to HMRC.
This is worth doing carefully. If you reduce your payments too far and your actual tax bill later turns out to be higher, HMRC will charge interest on the shortfall, backdated to the original due date. A reasonable, honest estimate of your expected income is the safest approach, speak to an accountant such as Lexarox Accounts if you’re unsure.
What If You Genuinely Can’t Pay by 31 July?
If the deadline is approaching and you know you won’t have the funds, the worst thing you can do is nothing. HMRC has formal routes to help taxpayers who are struggling, and getting in touch before the deadline rather than after, puts you in a much stronger position.
1. Set Up a Time to Pay Arrangement
HMRC’s Time to Pay service lets you spread what you owe into manageable instalments. If you’ve filed your latest tax return, owe £30,000 or less, are within 60 days of the payment deadline, and have no other outstanding payment plans or debts with HMRC, you can usually set this up yourself online through your Government Gateway account, without needing to speak to anyone.
To apply online you’ll need your Unique Taxpayer Reference (UTR), your UK bank account details (you must be authorised to set up a Direct Debit), and details of your income and outgoings so HMRC can check the plan is affordable.
2. Call the Self Assessment Payment Helpline
If you owe more than £30,000, need longer than the online tool allows, or your circumstances don’t fit the standard online criteria, you can contact HMRC’s Self Assessment Payment Helpline to discuss a bespoke arrangement.
3. Understand the Cost of Doing Nothing
If you miss the deadline and don’t arrange a payment plan, HMRC will charge daily interest on the outstanding amount from 1 August. As of the most recent update, HMRC’s late payment interest rate is set at the Bank of England base rate plus 4%, giving a current rate of 7.75% a year. This rate is reviewed and can change when the Bank of England adjusts the base rate, so it’s worth checking GOV.UK for the live figure before estimating what you’d owe.
Unlike the 31 January Self Assessment deadline, a late payment on account doesn’t attract the same fixed late-payment penalty structure in isolation but interest still accrues every single day the balance remains unpaid, and it compounds the pressure on your final January bill.
Practical Ways to Pay
HMRC offers several ways to settle your bill, and you don’t need to pay the full amount in one transaction if you’d rather chip away at it before the deadline:
- Online or telephone banking (Faster Payments) using HMRC’s sort code and account number.
- Through your online HMRC account or the HMRC app.
- By setting up a Direct Debit.
- By debit card online.
- Through weekly or monthly budget payments set up in advance of the deadline.
Always quote your UTR as the payment reference so HMRC allocates the payment to your account correctly. Not sure of how you do it? Get in touch with Lexarox Accounts and easily make a second payment on account before 31 July.
A Practical Example
Suppose your 2024/25 Self Assessment tax bill was £6,000. You would have paid £3,000 as your first payment on account by 31 January 2026, and the remaining £3,000 second instalment falls due on 31 July 2026. When you eventually file your 2025/26 return, HMRC compares your actual liability to the £6,000 already paid on account. If you owe more, a balancing payment is due the following 31 January; if you owe less, HMRC refunds the difference.
Key Takeaways
- The second payment on account is due by midnight on 31 July, this is a payment deadline only, not a filing deadline.
- It applies if your prior year’s tax bill exceeded £1,000 and less than 80% was collected through PAYE.
- You can apply to reduce the payment if you honestly expect lower income this year, but under-reducing risks interest on the shortfall.
- If you can’t pay, act before the deadline: use HMRC’s online Time to Pay service or call the Self Assessment Payment Helpline.
- Interest currently accrues at the Bank of England base rate plus 4% from 1 August on any unpaid balance, check GOV.UK for the current rate, as it changes with the base rate.
Frequently Asked Questions
1. What happens if I miss the payment on account 31 July deadline?
HMRC doesn’t apply an immediate fixed penalty purely for missing this date, but daily interest starts accruing from 1 August on whatever remains unpaid, at HMRC’s published late payment interest rate. The longer the balance sits unpaid, the more it costs, and it can also affect your January balancing payment calculations.
2. Do I still have to pay if I haven’t filed my tax return yet?
Yes. If HMRC has told you to make payments on account based on your previous year’s bill, that obligation stands regardless of whether you’ve filed your current year’s return. The amount is based on last year’s figures unless you’ve applied to reduce it.
3. Can I reduce my second payment on account?
Yes, if you reasonably expect your income and tax liability for the current year to be lower than the year the payment is based on. You can apply through your Self Assessment return or by submitting form SA303 to HMRC. Be cautious: if your actual bill ends up higher than the reduced amount, HMRC will charge interest on the underpayment.
4. What if I can’t afford to pay the full amount by 31 July?
Contact HMRC as soon as possible. If you owe £30,000 or less, have filed your latest return, and are within 60 days of the deadline, you can usually set up a Time to Pay instalment plan online. For larger debts or more complex situations, call the Self Assessment Payment Helpline to discuss a tailored arrangement.
5. Is there a penalty specifically for late payments on account?
There’s no separate fixed penalty charged purely for a late payment on account in isolation. The main cost is daily interest from 1 August. However, unpaid amounts feed into your overall Self Assessment position, and the usual late payment penalty regime applies if tax remains unpaid well beyond the following January deadline.
6. What’s the current HMRC interest rate on late payments?
HMRC’s late payment interest rate is set at the Bank of England base rate plus 4%. This rate changes periodically in line with Bank of England base rate movements, so always check the current figure on GOV.UK’s official rates and allowances page before calculating what you might owe.
7. Can I set up a payment plan before the deadline to avoid missing it?
Yes, and this is the recommended approach if you know in advance you’ll struggle to pay. Setting up a Time to Pay arrangement ahead of 31 July means you avoid the risk of interest building up while you wait, and gives you a clear, manageable schedule.
8. Does the payment on account 31 July deadline apply to everyone who does Self Assessment?
No. It only applies if your previous year’s Self Assessment tax bill was over £1,000 and less than 80% of your tax was collected at source through PAYE. If your bill was £1,000 or under, or most of your tax is already deducted at source, you won’t be asked to make payments on account.
