Published 20 May 2026. If you owed more than £1,000 in tax on your 2024/25 Self Assessment, you are in the UK's payments on account system. Your first payment on account for 2025/26 came out on 31 January 2026, alongside the 2024/25 balancing payment. The second payment on account for 2025/26 is due on 31 July 2026 — roughly ten weeks from today. This is the payment that catches sole traders most badly each year, because it lands with no return-filing trigger to focus the mind. The money just leaves.
What follows is what payments on account actually are, how to work out exactly what you owe on 31 July 2026, the legitimate options to reduce that payment if your income has dropped, and what happens if you miss it.
What payments on account actually are
HMRC's payments on account system is a forward-looking pre-payment mechanism. If your Self Assessment tax bill for a given year exceeds £1,000 — and is not more than 80% covered by tax already deducted at source (PAYE, CIS, etc.) — HMRC asks you to pre-pay the next year's tax in two instalments, in advance, based on the assumption that next year will look like last year.
- First payment on account — due 31 January, alongside the balancing payment for the year you are filing. Equal to 50% of the previous year's total tax bill (income tax plus Class 4 NIC, excluding capital gains tax and student loan).
- Second payment on account — due 31 July, also 50% of the previous year's bill. Same amount as the first.
- Balancing payment — due the following 31 January, settling any difference between what you actually owe for the year and what you have already pre-paid.
HMRC's payments on account guidance sets out the rules in full. The mechanism is sensible from HMRC's cash-flow point of view and brutal from a sole trader's, because the second payment in July comes due in a month where nothing else makes you look at your tax position — no return is filed, no statement arrives in the post, just a direct debit if you have one set up or a payment instruction if you do not.
What you owe on 31 July 2026
For the 31 July 2026 second payment on account, the number is fixed and already known. It equals exactly half of your total Self Assessment liability for 2024/25 (income tax + Class 4 NIC), and it is the same figure that HMRC took from you on 31 January 2026 as the first payment on account. You can find the exact figure in three places:
- Your 2024/25 SA302 calculation — issued by HMRC after your 2024/25 return was processed.
- Your HMRC Self Assessment online account — sign in via the government Self Assessment service and check "View your tax statement". The 31 July figure is shown.
- Your January 2026 payment — the second payment on account is the same amount as the first.
The payment due on 31 July is the second instalment of 2025/26 tax, calculated from 2024/25. It is not a payment for the year that has just ended (2025/26) — that year is not yet settled. The Final Reckoning for 2025/26 comes on 31 January 2027 as the balancing payment, when your filed return shows whether your two payments on account were too much, too little, or about right.
A worked example
Take a sole trader with a 2024/25 tax bill of £18,400 (income tax + Class 4 NIC, ignoring student loan and CGT).
| Date | What is paid | Amount |
|---|---|---|
| 31 January 2026 | 2024/25 balancing payment (if any) + first payment on account for 2025/26 | Balance + £9,200 (50% of £18,400) |
| 31 July 2026 | Second payment on account for 2025/26 | £9,200 |
| 31 January 2027 | 2025/26 balancing payment + first payment on account for 2026/27 | Balance + 50% of 2025/26 total tax |
The shape of this matters. By 31 July 2026, this sole trader will have prepaid £18,400 of tax against the year that ended on 5 April 2026 — exactly the prior-year total. Whether that is too much or too little depends on what their 2025/26 income actually was. If 2025/26 was a stronger year, the balance on 31 January 2027 will be positive (they owe more) plus the first 2026/27 payment on account on top — a heavy January. If 2025/26 was a weaker year, the balance on 31 January 2027 is a refund, and they may also be able to reduce future payments on account.
How to reduce payments on account (SA303)
If your 2025/26 income has fallen materially below 2024/25, the law allows you to apply to reduce both payments on account. The mechanism is HMRC's SA303 — Claim to reduce payments on account, available on paper or, more practically, through your Self Assessment online account ("Reduce my payments on account").
You can apply at any time, but to affect the 31 July 2026 payment, your reduction request must be in before that date. Apply on 1 August and the full payment has already been taken — you can recover the over-payment later, but you have given HMRC working capital for six months interest-free.
Legitimate grounds for reducing payments on account include:
- Genuine reduction in self-employment income. Lost a key client, took a partial sabbatical, scaled the business back deliberately, had a year of poor trading.
- Loss of a major property income source. Sold a buy-to-let, had a long void period, switched from short-let to long-let with lower yield.
- Material increase in deductible expenses. Heavy capital expenditure with full Annual Investment Allowance, large legal or professional fees that did not exist in the prior year.
- Pension contributions. A large personal pension contribution generating higher- or additional-rate relief that reduces the tax bill for the current year.
- Move into PAYE employment. Closed the sole trade or scaled it back and now have most income taxed at source.
Two warnings. First, the reduction must be a genuine estimate based on reasonable grounds — HMRC charges interest (and, in cases of carelessness, a penalty) if you reduce payments on account too aggressively and the final tax bill comes in higher than the reduced amount. The interest rate on under-paid tax is currently 7.75% as of HMRC's interest rate schedule, materially higher than savings rates, so over-aggressive SA303 claims are expensive.
Second, an SA303 reduction does not change your tax — only the timing of the cash. If your final 2025/26 liability is exactly what 2024/25 was, reducing the July payment to £5,000 (from £9,200) means a £4,200 catch-up on 31 January 2027 plus the normal 2026/27 first payment on account. Use SA303 when your income has genuinely dropped; do not use it as a short-term cash management tool.
What happens if you miss the 31 July payment
HMRC treats missed payments on account as late payment of tax, with three consequences that compound:
- Interest from day one. Late-payment interest starts accruing from 1 August at HMRC's published rate (currently 7.75% per annum as of May 2026). The interest is daily and compounds against the unpaid balance until settled.
- No automatic late-payment penalty on the July payment alone. Late-payment penalties (5% at 30 days, then again at 6 months and 12 months) apply to the balancing payment due on 31 January, not to payments on account. This is a quirk: missing the July payment is "only" interest, while missing the January balancing payment escalates fast.
- Knock-on effect at year-end. A missed July payment is rolled into the 31 January 2027 figure. Now you face: the missed July payment plus accrued interest, plus the 2025/26 balancing payment, plus the first 2026/27 payment on account. A bad July becomes a brutal January.
If you are going to miss the payment, the best option is a Time to Pay arrangement with HMRC. The official Time to Pay guidance sets out the process. For Self Assessment debts under £30,000, the arrangement is typically self-service through the online account if certain conditions are met — interest still accrues, but no late-payment penalty applies to the rescheduled amount provided the arrangement is honoured. Setting up Time to Pay before the deadline is meaningfully better than missing and then setting one up afterwards.
Cash planning for the deadline
Three operating practices will save you from 31 July surprises.
- Hold tax in a separate pot. Open a separate savings account labelled "tax". Transfer roughly 25–30% of every payment received into it (the percentage depends on your effective tax rate). When 31 January and 31 July come, the money is already there. The pot earns interest in your name, not HMRC's.
- File the 2025/26 return in May or June. Filing the prior-year Self Assessment before the July payment on account is due is the operational win. It tells you exactly where you stand — whether you are over- or under-paid year to date — and whether an SA303 reduction is warranted. The case for early filing is laid out in detail in our piece on filing your 2025/26 return by 31 July 2026.
- Sense-check the figure two weeks early. Sign into your HMRC online account by mid-July, confirm the figure due on 31 July, and confirm the payment method. Direct debit takes 3 working days to clear; Faster Payment is instant; bank transfer can take 2–3 days. Last-minute Faster Payment is the safest route for a tight deadline.
For sole traders also in MTD ITSA from 6 April 2026, the cash-planning rhythm gets easier from the next tax year — quarterly submissions force you to look at year-to-date tax position four times a year rather than twice. Our MTD for Income Tax service page covers how the quarterly cadence reshapes Self Assessment planning. For sole traders running alongside a limited company, the limited company accountant work and the personal Self Assessment cash plan should be coordinated, not run independently.
FAQs
The 31 July 2026 second payment on account is a payment you already know the amount of, against tax that already happened, on a year that is already settled. The owners who get this date right know the figure by mid-June, have the cash in a separate pot, and have filed their 2025/26 return early enough to know whether SA303 is the right call. The owners who get it wrong find out about it on 1 August.
Plan your 31 July payment with confidence
If you are not sure whether the figure HMRC is expecting on 31 July is the right one — because your 2025/26 income has dropped, or you have made significant pension contributions, or you are not certain whether SA303 applies — let me look at the numbers and reply with a clear view.
Start with a free written assessment — bring your 2024/25 SA302 and a rough sense of 2025/26 income, and Stuart will reply with a clear plan for the deadline. No calls.