Payments on account for UK Self Assessment: the 31 January and 31 July deadlines, the £1,000 threshold and the 80% rule

If you fill in a Self Assessment tax return in the UK, you usually don't pay your tax in one go. Instead you make two advance payments a year, called payments on account. Here is how they work, according to HM Revenue and Customs (HMRC): what they are, the two deadlines, who is exempt and how to reduce them.

What are payments on account?

They are payments towards your next tax bill. HMRC takes the tax you owed last year and asks you to pay it in advance in two instalments, spreading the cost across the year. In effect you pay ahead for a tax year that has not finished yet.

What are the deadlines — 31 January and 31 July?

There are two payments, each with its own deadline. As GOV.UK sets out, the payments are due by midnight on 31 January and 31 July. On 31 January you pay two things at once: the balancing payment for the previous tax year and your first payment on account. On 31 July you make your second payment on account. Remember that 31 January is also the deadline to pay the tax itself and to file your online return.

When do payments on account not apply?

There are two situations where you do not have to make them. You are exempt if either of these is true:

• the amount of tax you owed last year was less than £1,000; or
• you paid more than 80% of last year's tax at source — for example through PAYE on your wages or pension.

If either applies, you simply pay the whole amount in one go, with no payments on account.

How much is each payment, and what is the balancing payment?

Each payment is usually half (50%) of the tax you owed the previous year. Together the two payments roughly cover last year's bill. If your actual tax for the year turns out higher, you pay the difference as a balancing payment. It is worked out by deducting the payments on account you have made from the total tax you owe, and it is due by midnight on 31 January the following year — the same day as your first payment on account for the new year. If your bill is higher than expected, you'll be charged interest on the difference.

How can you reduce your payments on account?

If you know your tax will be lower than last year, you can ask HMRC to reduce the payments. There are two ways:

• online — sign in to your tax account, select your latest Self Assessment return and choose "Reduce payments on account"; or
• by post — send form SA303 to your tax office.

Don't cut them too far: if you reduce the payments and your real tax turns out higher, you'll be charged interest on the shortfall. You can read the full rules on GOV.UK.