Payments on Account: The Self-Assessment Bill That Surprises First-Year Freelancers
By TaxHelper Editorial · Last updated 24/05/2026
Every January, thousands of first-year freelancers face a tax bill that is roughly twice what they expected. The culprit is a little-understood mechanism called payments on account.
What Are Payments on Account?
When you complete a Self Assessment return and owe more than £1,000 in income tax and Class 4 NI, HMRC requires you to pay your current year's bill and make advance payments towards the next year's bill. Each payment on account is 50% of your previous year's bill, due on 31 January and 31 July.
The First-Year Freelancer Shock
Imagine Emma went freelance in 2025/26 and earned £40,000. Her total tax and NI bill is approximately £8,000. She expects to pay £8,000 by 31 January 2027. What she actually pays:
- Balancing payment for 2025/26: £8,000
- First payment on account for 2026/27: £4,000 (50% of £8,000)
- Total due in January: £12,000
In July 2027, she pays another £4,000. The January shock is real — unprepared freelancers can face serious cash-flow problems.
How to Reduce Payments on Account
If you expect your income to fall in the next tax year, you can ask HMRC to reduce your payments on account via your Personal Tax Account (form SA303). Be careful — if you reduce them and your income is actually higher, HMRC charges interest on any shortfall.
Key Dates
- 31 January 2027: Balancing payment for 2025/26 + first POA for 2026/27
- 31 July 2027: Second payment on account for 2026/27
- 31 January 2028: Balancing payment for 2026/27
Set aside 25–30% of each invoice into a tax pot. Use our self-employed calculator to estimate your bill each month.