UK Payment on Account in July: How to Prepare
If you are self-employed in the UK, July brings a tax bill that catches many people off guard: the second payment on account, due on 31 July. It arrives in the middle of summer, when holidays, quieter months and school breaks are already squeezing cash. The good news is that it is completely predictable, and a few simple steps now mean you can pay it calmly and on time.
Key takeaways
- Payments on account are advance payments towards your next Self Assessment bill, and the second one is due on 31 July.
- In 2027, 31 July falls on a Saturday, so set up your payment early in the week to make sure it arrives in time.
- Check the exact amount in your HMRC online account rather than guessing.
- If your income has dropped, you may be able to apply to reduce the payment, but reducing it too far can lead to interest later.
- A separate tax pot, topped up every time you are paid, turns July from a scramble into a routine transfer.
Payments on account confuse a lot of freelancers, sole traders and partners, especially in their second year of self-employment, when the first big Self Assessment bill seems to be followed almost immediately by another one. Once you understand how the system works, though, it becomes just another bill you can plan for.
This guide explains what the July payment is, how to check the amount, when it might make sense to reduce it, and how to make sure the money is ready. A quick note: this is general information about the UK tax system, not personal tax advice. Rules and thresholds change, so check GOV.UK and your HMRC online account, and speak to an accountant or tax adviser about your own situation.
What a payment on account is
Self Assessment lets HMRC collect tax from people whose income is not all taxed at source, such as the self-employed, partners and landlords. Instead of waiting for the full bill after the tax year ends, HMRC usually asks for advance payments towards the next bill. These are payments on account.
In most cases there are two payments on account each year, and each one is usually half of your previous year's tax bill. The first is due on 31 January and the second on 31 July. Then, the following January, you settle any remaining amount with a balancing payment, or receive a refund if you overpaid.
So if your previous year's Self Assessment bill was large, your July payment will be large too, regardless of how your business is doing this summer. That is why it can feel unexpected.
Who has to make them
Not everyone in Self Assessment has to make payments on account. If your previous bill was below a certain level, or most of your tax was already collected at source, for example through PAYE, you may not need to. HMRC will show whether payments on account apply on your tax calculation and in your online account. Check the current thresholds on GOV.UK rather than relying on memory, because they can change.
Common mistake
Assuming the January bill was the whole story. In your first year of payments on account, January often includes both the balancing payment for last year and the first payment on account for this year. Many people pay that, relax, and then forget that another payment is due six months later.
Check the exact amount you owe
Do not estimate the July payment from memory or from a percentage you read somewhere. Look it up.
- Sign in to your HMRC online account. Go to your Self Assessment section and look at your statement or "what you owe" view. The second payment on account should be listed with its due date.
- Find your payment reference. You need your Unique Taxpayer Reference (UTR) and the correct reference format for the payment. HMRC shows this when you choose to pay.
- Compare with your tax calculation. The amount should match what was shown when you or your accountant filed last year's return. If it does not, ask why before you pay.
- Check for anything else due. Late payment interest, penalties or an unpaid January amount may also be showing. Deal with those at the same time.
- Note the figure in your cash plan. Write it down with the due date so it sits alongside your other July outgoings.
Pro tip
If an accountant files your return, ask them to send a short summary every year listing the January and July amounts. A one-line email saves you hunting through the online account in a hurry.
Should you reduce your payment on account?
Because payments on account are based on last year's bill, they can be too high if your income has fallen. HMRC lets you apply to reduce them if you expect this year's tax to be lower. You can usually do this through your online account or with a form; check GOV.UK for the current process.
Reasons people consider a reduction include:
- Your profits have fallen noticeably, for example after losing a major client.
- You have stopped trading or switched to employment with tax taken through PAYE.
- Last year included a one-off boost, such as a large project that will not repeat.
- You have new reliefs or allowable expenses that significantly reduce this year's bill.
The risk of reducing too much
If you reduce your payments and your actual tax for the year turns out higher, you will owe the difference, and HMRC can charge interest on the amount you underpaid. So base any reduction on realistic numbers: your actual profits so far this tax year, plus a careful forecast for the rest. If in doubt, a small reduction or none at all is often the safer choice, and an accountant can help you judge it.
Hypothetical example
Imagine Aisha, a freelance photographer. Her last Self Assessment bill was £8,000, so her payments on account are £4,000 each. In spring she lost her biggest wedding client and now expects this year's bill to be closer to £5,000. With her accountant's help, she applies to reduce each payment to £2,500. She keeps her tax pot topping up as normal, so if the second half of the year goes better than expected, the money for the January balancing payment will already be there. All figures are made up for illustration.
How to have the money ready by 31 July
The best July payment is one you funded months ago. If you are reading this in mid-July with a gap, jump to the next section. Otherwise, here is how to make next July painless too.
Use a dedicated tax pot
Open a separate savings account or banking pot just for tax. Every time a client pays you, move a set share of the payment into it. The right share depends on your profits, expenses and tax position, so ask your accountant for a sensible figure, or work back from your last tax bill as a share of your income. The point is consistency: little and often beats one painful transfer.
Plan around the summer dip
For many businesses, July and August are quieter. Schools break up, clients go on holiday and decisions slow down. That makes it risky to rely on July income to pay a July bill. Ideally, the full amount should be sitting in your tax pot by the end of June.
A simple tax pot tracker
Copy this into a spreadsheet and update it whenever you move money. The amounts are made-up examples.
| Date | Income received (example) | Moved to tax pot (example) | Pot balance | Next payment due | Amount needed |
|---|---|---|---|---|---|
| 2 May | £2,400 | £600 | £2,900 | 31 July | £4,000 |
| 28 May | £1,800 | £450 | £3,350 | 31 July | £4,000 |
| 20 June | £2,600 | £650 | £4,000 | 31 July | £4,000 |
Once the pot reaches the July figure, keep going: the January balancing payment and the next first payment on account are the next targets.
Paying on time: the practical steps
Paying HMRC is straightforward, but timing matters, and in 2027 the calendar adds a wrinkle.
- Mind the weekend. 31 July 2027 is a Saturday. Payments that rely on bank processing may not arrive over a weekend, so check GOV.UK for how long each method takes and pay during the working week before.
- Choose your method. HMRC accepts several payment methods, including bank transfer, online banking through your account, and debit card. Some are faster than others, so check the current timings.
- Use the right reference. A wrong reference can mean your payment is allocated incorrectly. Copy it directly from your online account.
- Keep proof. Save a screenshot or confirmation of the payment in your tax folder.
- Check it landed. A few days later, check your HMRC account to confirm the payment shows against the right period.
Common mistake
Leaving the payment until the evening of 31 July. Even in a normal year, a bank delay, a forgotten security device or a typo in the reference can push the payment late. Aim to pay at least a week early.
If you cannot pay the full amount
Sometimes the money simply is not there. If that happens, act early rather than hoping it will sort itself out.
- Pay what you can. A part payment reduces the amount that can attract interest.
- Look at a Time to Pay arrangement. HMRC may agree a payment plan for Self Assessment debts in some circumstances. Check eligibility and the process on GOV.UK, and contact HMRC before the deadline if you can.
- Review whether a reduction applies. If your income has genuinely fallen, a reduced payment on account may be appropriate.
- Talk to an adviser. An accountant, or a free debt advice service if things are tight personally, can help you choose the right route.
Avoid covering a tax bill with expensive short-term borrowing without thinking it through. Options like a merchant cash advance can cost far more than a structured plan with HMRC.
A note for employers: July has another deadline
If you employ people and provide benefits in kind, such as a company car, July also brings the P11D deadline on 6 July. Company cars are a taxable benefit in kind, so they usually need reporting. It is worth checking both dates together during your end-of-June review, so neither slips while you focus on the other.
Your payment on account checklist
- Sign in to your HMRC online account and confirm the July amount
- Copy your payment reference and save it somewhere safe
- Decide whether a reduction is justified, ideally with an accountant
- Check your tax pot balance against the amount due
- Schedule the payment for the week before 31 July 2027
- Save the payment confirmation in your tax folder
- Confirm the payment shows in your HMRC account a few days later
- Set your tax pot target for the January payments
Frequently asked questions
Why do I have to pay tax in advance?
Payments on account spread your Self Assessment bill across the year, similar to how employees have tax taken from each payslip. They are based on last year's bill, and any difference is settled in the following January.
What happens if I pay late?
HMRC usually charges interest on late payments, and other charges can apply in some situations. Check GOV.UK for the current rules, and if you know you will struggle, contact HMRC before the deadline.
Will I get money back if I overpay?
If your payments on account turn out to be more than your actual tax for the year, the overpayment is usually refunded or set against your next bill once you file your return.
I am in my first year of self-employment. Does this apply to me?
Usually not until after your first Self Assessment return, because payments on account are based on a previous year's bill. But your first January bill may include the first payment on account for the following year, so start saving early.
Related reading
The bottom line
The 31 July payment on account is not a surprise bill: it is half of last year's tax, paid in advance. Check the exact amount in your HMRC account, decide carefully whether a reduction is justified, and make sure the money is in a separate tax pot before summer slows things down.
In 2027 the deadline falls on a Saturday, so pay in the week before and save your confirmation. Then set your next target and keep topping up the pot, and next July will be just another quick transfer.
