If you’re self-employed or earn income outside of PAYE, there’s an important deadline looming that could catch you out if you’re not prepared. On 31 July 2025, the second payment on account towards your self-assessment tax bill for the 2024/25 tax year is due.
So, what is a payment on account, who needs to pay it and what should you do if the cash just isn’t there?
What Is a Payment on Account?
Payments on account are advance payments towards your next self-assessment tax bill. HMRC assumes that your income in the current tax year will be roughly the same as the previous year, so they ask you to pay some of your tax up front in two instalments:
- First payment on account – due 31 January 2025
- Second payment on account – due 31 July 2025
Each payment is typically 50% of your previous year’s tax bill, not including Capital Gains Tax (CGT) or student loan repayments.
For example, if your 2023/24 tax bill was £6,000, HMRC would expect you to pay £3,000 in January 2025 and another £3,000 in July 2025.
Who Needs to Pay It?
You’ll need to make payments on account if:
- Your self-assessment tax bill was over £1,000 last year
- Less than 80% of your income tax was collected via PAYE (through employment or pension)
This applies to many business owners, landlords, freelancers and high earners – so if that’s you, this deadline is one to have firmly on your radar.
What If My Income Has Dropped?
If your profits are lower this year, you don’t have to pay blindly. You can apply to reduce your payments on account. But tread carefully, if you reduce them too much and end up underpaying, HMRC can charge interest and penalties on the deficit.
We always recommend speaking to your accountant or contacting us before making any changes. Guesswork can cost you!
What If I Can’t Afford It?
Sometimes cashflow doesn’t line up neatly with HMRC’s deadlines. If you can’t make the full payment by 31 July, here are your options:
- Contact HMRC and set up a Time to Pay arrangement. This can spread the payment over several months
- Speak to us at GreenStones. We can help you assess your cashflow, talk you through your options and even liaise with HMRC on your behalf if needed
Whatever you do, don’t ignore the deadline. Missed payments can lead to interest charges and a dent in your cash reserves when you least need it.
Stay Ahead of the Curve
Getting ahead of tax deadlines like this one can make a huge difference to your peace of mind and your bank balance. If you’re unsure what you owe, worried about affording it or want to get a better grip on your upcoming tax liabilities – we’re here for you.
Give us a call on 01733 371180 to talk about your options and to see how we can help you manage your cashflow with confidence.
Let us take the pressure off, so you can focus on what you do best.