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Payments on Account

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If your tax bill is more than £1000, you’ll be required to make ‘balancing payments on account’ towards your next years’ tax bill.

These are advance payments which are then deducted against next years’ tax bill.

Payments on Account (POA) take into consideration the total Tax due and Class 4 National Insurance (Class 2 is not included in calculations)

There are 2 payments due each year, one when you submit your tax return (due by Midnight, 31 January) and a future payment later in the year (due by Midnight, 31 July).

The idea behind these is that you’re paying your tax in advance for the next year, partly to keep you on track and avoid a large bill when you submit your next return.

Next year, when you submit your tax return and have tax to pay on earnings, any balancing payments which you’ve made are taken off as you’ve pre-paid these.


Matt has a tax bill at the end of the 2022/23 tax year for £2,000.

He pays this direct to HMRC, however an additional charge of £1,000 is due – this is half of the tax bill estimated for the next year. This must be paid before the 31 January deadline when all other tax is due.

An additional payment of £1,000 is also due. He’s now in ‘credit’ with HMRC for £2,000.

Next year, Matt is due to pay £4,000 in tax based on his earnings.

HMRC takes away the two POA payments (£2,000 in total) which were paid earlier in the year. Matt therefore is due to pay £2,000 to balance the tax for the 2023/24 tax year.

HMRC would then expect a further payments on account to be made by 31 January, as this is the first ‘balancing payment’ towards the next years’ estimated tax amount.

Reducing your Payments on Account

If you know your tax bill next year is going to be lower than this year (and therefore payments on account would be more than the tax bill), you can ask HMRC to reduce your payments on account.

This can be done from within your Personal Tax Account, or by completing form SA303.

Important: If you reduce your payments on account and your tax bill next year is not lower, HMRC will charge penalties and interest.

If you’re a MalgraBooks client, our team will discuss options with you and arrange for the relevant forms to be completed on your behalf.

Updated on February 17, 2023
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