Why is my first Self Assessment tax bill so big?

Because of Payments on Account. If your tax bill is over £1,000, HMRC charges this year's tax plus a first advance payment of 50% toward next year, both due on 31 January — so your first bill is about 150% of the year's tax, with another 50% due 31 July.

When do Payments on Account not apply?

If your last Self Assessment bill was under £1,000, or if more than 80% of your tax was already collected at source (for example through PAYE), you do not make Payments on Account.

Can I reduce my Payments on Account?

Yes. If you expect to earn less next year you can apply to reduce them, but if you reduce them too far HMRC charges interest on the shortfall. Only reduce them if you are confident your income will fall.

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Why is my first tax bill so big?

Q: What are Payments on Account?

Two advance payments toward next year's tax bill, each 50% of this year's Income Tax and Class 4 National Insurance. They are due on 31 January and 31 July. They are not extra tax — they are credited against next year's bill.

By Remus Pantea · 16 June 2026 · 5 min read

Quick answer: Your first Self Assessment bill feels enormous because of Payments on Account. If your tax bill is over £1,000, HMRC asks for this year's tax plus a 50% advance toward next year — both on 31 January — so your first payment is about 150% of the year's tax. Another 50% is then due 31 July.

What are Payments on Account?

Payments on Account are advance payments toward next year's tax bill. HMRC assumes you'll earn roughly the same next year, so it asks you to pay it in two instalments in advance:

First payment on account: 50% of this year's tax, due 31 January
Second payment on account: the other 50%, due 31 July

They cover your Income Tax and Class 4 National Insurance. They are not an extra tax — every penny is credited against next year's bill.

A worked example

Say your profit is £45,000, so your Income Tax + Class 4 NI for the year is about £8,432 (you can check your own figure with our tax calculator). Your first cycle looks like this:

31 January: £8,432 (this year) + £4,216 (first payment on account) = £12,648
31 July: £4,216 (second payment on account)

That's why the January bill is such a shock: you're paying 1.5× a full year's tax in one go. From the second year onward it evens out, because you've already paid half in advance.

When do Payments on Account apply?

You make them unless either of these is true:

Your last Self Assessment bill was under £1,000, or
More than 80% of your tax was already collected at source (for example through a PAYE job).

Can I reduce them?

Yes — if you genuinely expect to earn less next year, you can apply to reduce your Payments on Account. But be careful: if you cut them too far and end up owing more, HMRC charges interest on the shortfall. Only reduce them if you're confident your income is falling.

How to never be caught out

The trick is to stop thinking of your income as yours to spend. Two habits fix it for good:

Set aside your effective tax rate (often 20–28%) of every payment into a separate account — our tax calculator shows your exact percentage and your Payments on Account dates.
Claim every expense. A smaller profit means a smaller bill and smaller payments on account. The reason most sole traders over-pay is simply lost receipts.

PocketReceipt captures every receipt and expense as you go, so your profit — and your bill — is as low as it should legitimately be. Free on iOS and Android.

Sources: gov.uk Understand your Self Assessment statement — Payments on Account; gov.uk Income Tax rates. General information, not tax advice.