Self-assessment taxpayers typically need to pay their Income Tax liabilities in three instalments each year. The first two payments on account are due by 31 January during the tax year and by the 31 July after the tax year has ended. Each payment on account is based on 50% of the previous year’s net Income Tax liability. Additionally, the third (or balancing) payment is due on 31 January after the tax year ends.
If you expect your income for the following tax year to be lower than the previous year, you can apply to reduce your payments on account. This can be done through HMRC’s online service or by submitting form SA303.
It’s important to note that you do not need to make payments on account if your net Income Tax liability for the previous year is less than £1,000, or if more than 80% of your tax liability was collected at source.
There is no limit on the number of times you can apply to adjust your payments on account. If your liability for 2024-25 is lower than for 2023-24, you can request HMRC to reduce your payments. The deadline to submit a claim to reduce your payments on account for 2024-25 is 31 January 2026.
If your taxable profits have increased, there is no obligation to inform HMRC, but your final balancing payment will usually be higher.