Do payments on account include Class 2 NIC?

No, payments on account are based on your income tax and Class 4 National Insurance, not Class 2. Class 2 NIC is usually collected through your Self Assessment bill but isn't included in the payments on account calculation.

If you pay more on account than your actual tax bill, you'll get a refund once you file your return. HMRC will either send you a refund or offset it against other tax you owe.

Do first-year traders pay them?

No, because in your first year you won't have a previous tax bill to base payments on account on. You'll start making payments on account from your second year onwards, if your bill exceeds the threshold.

Payments on account: how they work and when they are due

Payments on account are two advance payments towards next year's Self Assessment bill, each half of this year's liability, due 31 January and 31 July. They apply when your last bill was over £1,000 and less than 80% was collected at source. You can apply to reduce them if you expect lower income.

What payments on account are

Payments on account are advance payments towards your next Self Assessment tax bill. Instead of paying all your tax in one go after you file your return, you make two payments on account during the year, each covering half of your previous year's tax bill. These are then set against the tax you actually owe when you submit your return.

When they apply

You'll need to make payments on account if your last Self Assessment bill was over £1,000 and less than 80% of your tax was collected at source (for example, through PAYE). If either condition isn't met, you won't have to make payments on account.

Worked example

Say your tax bill for the 2023/24 tax year is £2,000. You'll pay £1,000 on 31 January 2025 (your balancing payment for 2023/24) and then £1,000 on account towards 2024/25. Another £1,000 is due on 31 July 2025. When you file your 2024/25 return, the £2,000 you've already paid is deducted from your actual bill.

Due dates

Payments on account are due on:

31 January (with your balancing payment)
31 July

Each payment is half of your previous year's tax bill. If you still owe tax after these payments, you'll pay a balancing payment with your next return.

Reducing payments on account

If you expect your income to be lower this year, you can apply to reduce your payments on account. You do this by filling in form SA303 or through your tax account online. Be careful: if you reduce them and your actual bill is higher, you'll be charged interest on the underpayment.

Seeing your position in software

TaxCheckIt shows your payments on account clearly, so you know exactly what's due and when. You can see your balancing payment and any payments on account in your tax summary. This helps you plan your cash flow and avoid surprises.

For more on the basics, see our Self Assessment glossary and the balancing payment definition. If you're not using TaxCheckIt yet, see our pricing.