If you complete a Self Assessment tax return, you hopefully already know that 31st July is the deadline for making your second payment on account. However, not everyone realises that this payment isn’t always an accurate reflection of what they will actually owe.
Why your payment could be higher than necessary
Payments on account are calculated using your previous year’s tax bill. This means your July 2026 payment is based on the tax due for the 2024/25 tax year, rather than what you expect to earn during 2025/26. If your income has fallen since then, for example because your business has been quieter, you’ve reduced your working hours or your circumstances have changed, you may be paying more tax now than you need to.
Can you reduce your payment?
In many cases, yes. If you have good reason to believe your tax liability for 2025/26 will be lower, you can apply to reduce your payments on account. This can usually be done through your HMRC online Self Assessment account or by submitting form SA303. Before making any changes, it’s important to ensure your estimate is as accurate as possible.
A word of caution
Reducing your payment on account can improve cash flow, but it should only be done where there is clear evidence that your tax bill will be lower. If your estimate proves to be too low and you end up owing more tax than expected, HMRC may charge interest on the outstanding amount.
Another option: file your tax return early
If you already have the information needed to complete your 2025/26 Self-Assessment tax return, submitting it before the January deadline can be a sensible alternative. Once your return has been processed, HMRC will calculate your actual tax liability and adjust any payments on account accordingly. This removes the need to estimate your income and reduces the risk of unexpected interest charges.
Need advice?
Every taxpayer’s circumstances are different. If you’re unsure whether your July payment should be reduced or whether filing your tax return early is the better option, we’re here to help. Our team can review your position, explain your options and ensure you’re paying the right amount of tax – no more and no less. Get in touch today.
