Payment on account – now due!
How does payment on account work?
The first instalment is due at the end of January, along with any balance of tax due for that tax year, and is calculated based on your tax liability for that tax year. So in January 2026 you’ll pay the first instalment of the tax for the 2025/26 tax year, but it will be based on your tax liability in 2024/25. In other words, HMRC assumes your income and tax for the following tax year will be the same and charges you based on that.
The second (and final) instalment is due on 31st July, and, unless you take action, that will be based on the 2024/25 tax year too.
As the 2025/26 tax year ended 5th of April, you will have information available on your income levels for 2025/26. If your income levels are lower for 2025/26 than they were for 2024/25, the tax liability for 2025/26 will also be lower.
For instance, if your tax bill in 2024/25 was £10,000, you would have had payments on account for 2025/26 of £5,000 in January this year. Unless you change it, you’ll be due to pay another £5,000 on 31st July. But if your tax works out to be less than £10,000, you will only need to pay the balance – but you have to tell HMRC, they’re not clairvoyant.
This is an opportunity to reduce the amount of tax you pay. While, eventually, you will get a tax refund if you pay more than you need to, it’s better to keep the money in your bank account, rather than ‘lend’ it to HMRC!
If you have any questions about payment on account, or potentially any other related queries, then feel free to get in touch and our team of expert accountants in Hertfordshire will be happy to assist you!
