Payments on account: what's due on 31 January and 31 July, and whether to cut them

Who it’s for

Accountants and bookkeepers who explain the January bill to clients, and the UK sole traders and landlords who pay it

Time to set up

About 20 minutes

Difficulty

Beginner

Monthly cost

£0

Key dates for this: see UK small-business admin deadlines.

You are helping an accountant send a client a short email about their payments on account. A Google Sheet has already done every sum and made every decision. Your only job is to turn its lines into a short email.

Sheet lines:

Write the email like this:
1. Start with: Hi,
2. Copy each sheet line above exactly, word for word, in the same order, each as its own short paragraph. Keep every figure, date, percentage and link exactly as written.
3. If a sheet line is blank, leave it out and do not mention it.
4. Finish with: Any questions, just reply to this email.
5. Then leave a blank line and end with Thanks, on a line of its own.

Rules:
- Give only the email text, starting with Hi,. No subject line, no heading and nothing before or after the email.
- Write the link as plain text, exactly as it is in the sheet line.
- Do not work anything out, change any figure, reword any sentence or add any sentence of your own.
- No square brackets anywhere and no placeholders.
- British English.

It’s that time of year. Somewhere a client is opening their HMRC statement, spotting a January bill nearly twice the size they expected, and reaching for the phone. The usual suspect isn’t a mistake. It’s payments on account.

Payments on account are HMRC’s way of collecting next year’s tax before you’ve finished earning it. Each one is half of the tax you owed through Self Assessment last year, including Class 4 National Insurance if you’re self-employed, and they’re due by midnight on 31 January and 31 July (GOV.UK). Simple enough on paper. In practice, they’re behind a good share of the “why do I owe that?” conversations accountants have every winter.

Here’s one from the MoneySavingExpert forum this month. Last year’s tax was about £10,000, so the first payment on account in January was £5,000. The return, filed in July, showed this year’s tax was only £5,500. The accountant said the £500 left over wasn’t due until January 2027. About two weeks after 31 July, HMRC wrote to say a payment on account hadn’t been paid. By October the £500 was still showing as unpaid, with interest added. The poster asked the forum whether the accountant was wrong, “or have HMRC made a mistake?” (MSE forum).

Forum regulars worked it through on the thread. Once the return was in, both payments on account for that year dropped to £2,750 (half of £5,500), and the poster confirmed they had. On the regulars’ working, January’s £5,000 covered the first £2,750, leaving £2,250 of credit to go towards July’s £2,750. That left £500 to pay by 31 July, not next January. Nobody’s tax was wrong. The calendar was.

Then there’s the new one. On AccountingWEB, an accountant filed a return for a client with rent and self-employed income, saw £1,700 of payments on account showing as paid on her tax account, then watched them vanish once the return was processed. The client had been due a refund of over £2,000, and it shrank accordingly: “Has anyone else had this issue with clients not yet in MTD?” (AccountingWEB). Money rarely evaporates, even in January. There’s a GOV.UK answer for that too, further down.

This guide gets you a free Google Sheet that checks whether payments on account apply, works out the balancing payment, tells you what’s due on 31 January and 31 July 2027, and shows what reducing them saves now and could cost in interest later. It even writes the lines of a client email for you. A short copy-paste prompt then lays those lines out as an email. The sheet does every sum and makes every decision; the AI just does the typing.

What does this automation do?

1. You type six figures from the tax calculation (SA302) and the Self Assessment statement into one sheet.
2. It checks HMRC’s two exceptions: under £1,000 of tax through Self Assessment, or more than 80% of the tax paid some other way.
3. It works out the balancing payment for the year you’ve filed, and each payment on account for the year you’re in.
4. It adds them up into what’s due by 31 January 2027 and by 31 July 2027.
5. If you expect a lower bill this year, it shows the reduced payments, how much less each date is, and a rough idea of the interest if the reduction turns out to be wrong.
6. It writes the client email lines, picks the ones that apply, and stacks them in one place to copy.
7. You paste those lines into the prompt, which turns them into an email without changing a word or a figure.

How the dates line up for a return filed for 2025 to 2026:

When a deadline falls at a weekend, GOV.UK says to “make sure your payment reaches HMRC on the last working day before”, unless you’re paying by Faster Payments or by debit or credit card (GOV.UK). That’s Friday 29 January and Friday 30 July 2027. Both dates are on our small-business deadlines calendar.

What this means for you: both 2027 deadlines land on a weekend. If the money goes by a slow route, think Friday, not the 31st.

What do you need before you start?

• A free Google account, for Sheets.
• The tax calculation (SA302) for the year you’ve just filed. You need the income tax and Class 4 National Insurance owed through Self Assessment, and any capital gains tax or student loan repayment on the return.
• The tax paid outside Self Assessment that year, such as tax taken off a job’s pay through a tax code.
• The payments on account already paid towards that year. Sign in to the HMRC online account, choose the latest Self Assessment return, then “View statements” (GOV.UK).
• If income has dropped, a sensible estimate of this year’s tax.
• A free ChatGPT, Claude or Gemini account, if you want the prompt to lay out the email.
• About 20 minutes, and a cup of tea.

The sheet is for checking, not instead of HMRC’s figures. GOV.UK says the Self Assessment statement or online account “will show you how much they are, if you need to pay them”. If the sheet and the statement disagree, find out why before anyone pays anything.

How do I set it up?

Step 1: Find the figures on the tax calculation and statement

Payments on account are worked out from the tax you owed through Self Assessment last year: income tax plus Class 4 National Insurance. HMRC doesn’t count capital gains tax or student loan repayments. Its own manual says they’re “excluded from the computation of payments on account” and are “simply payable as part of the balancing payment on 31 January following the tax year” (HMRC manual SALF303, on GOV.UK). So keep them separate. The sheet adds them to the balancing payment and leaves them out of the payments on account.

There are two exceptions. You don’t make payments on account if “the amount of tax you owed last year was less than £1,000”, or if “last year you paid more than 80% of the tax you owed outside of Self Assessment (for example through your tax code or because your bank had already deducted interest on your savings)” (GOV.UK).

What this means for you: a client who sold some shares or is repaying a student loan will see a bigger January bill, but not bigger payments on account. One-off, not every six months.

Step 2: Set up the sheet

Open a new Google Sheet and rename the first tab POA. Put the labels in column A and the figures in column B:

Format B3:B7 as currency. Type B2 exactly as you’d like the client to read it, because it goes into the email.

The 7.75% in B8 is an example at today’s rate: HMRC’s late payment interest rate has been 7.75% since 9 January 2026, which is the Bank of England base rate plus 4% (GOV.UK: HMRC interest rates). It moves whenever the base rate moves, so check that page and update B8 when you use the sheet.

Step 3: Add the formulas

There are three blocks: the sums (rows 10 to 21), the client email lines (rows 23 to 27) and the email to copy (row 29 down). Keep the cells exactly where they are, because the formulas point at each other. Format B11:B19 as currency.

Put these labels in A10 to A21, one per row: Payments on account apply?, Balancing payment for the year filed, One payment on account (normal), One payment on account (if you reduce), Due by 31 January 2027 (normal), Due by 31 July 2027 (normal), Due by 31 January 2027 (if you reduce), Due by 31 July 2027 (if you reduce), Lower than normal on each date by, Rough interest if you reduce and the bill comes in like last year’s, Reduction to explain?, Overpayment from the year filed.

In B10, the two exceptions:

=IF(B3<1000,"No: SA tax under £1,000",IF(B5/(B3+B5)>0.8,"No: more than 80% paid outside Self Assessment","Yes"))

In B11, the balancing payment for the year you’ve filed:

=B3+B4-B6

In B12 and B13, the normal and reduced payment on account:

B12: =IF(B10="Yes",B3/2,0)
B13: =IF(OR(B7="",B10<>"Yes"),B12,MIN(B12,B7/2))

In B14 to B18, what’s due on each date, normally and if you reduce, and the difference:

B14: =MAX(B11,0)+B12
B15: =B12
B16: =MAX(B11,0)+B13
B17: =B13
B18: =B12-B13

In B19, a rough interest figure if you reduce and the bill comes in at last year’s level after all. It charges interest on each shortfall from its due date to 31 January 2028: 365 days from 31 January 2027 and 184 days from 31 July 2027.

=ROUND(B18*B8*(365+184)/365,2)

In B20 and B21, two plain flags: whether there’s a reduction to explain, and a warning if the year you’ve filed was overpaid.

B20: =IF(B18>0,"Yes","No")
B21: =IF(B11<0,"Overpaid by £"&TEXT(-B11,"#,##0.00")&": check your statement for the credit","None")

Now the client email lines. Leave row 22 empty and put these labels in A23 to A27: Email: what to pay, Email: overpayment, Email: if you reduce, Email: the catch, Email: later and if late. Each formula writes a finished sentence, or leaves the cell blank when it doesn’t apply. They’re long, so copy them whole.

In B23, what to pay and by when. It works out the weekend Fridays for you, and says so if there’s no July payment or nothing to pay at all:

=IF(B14+B15=0,"There's nothing to pay towards these bills on 31 January or 31 July 2027.",IF(B15=0,"Please pay £"&TEXT(B14,"#,##0.00")&" by Friday 29 January 2027. There's no payment on account to make in July. 31 January 2027 is a Sunday, so the money needs to reach HMRC by the Friday, unless you pay by Faster Payments or card.","Please pay £"&TEXT(B14,"#,##0.00")&" by Friday 29 January 2027 and £"&TEXT(B15,"#,##0.00")&" by Friday 30 July 2027. Both deadlines fall at a weekend, so the money needs to reach HMRC by the Friday, unless you pay by Faster Payments or card."))

In B24, a line only if the year you’ve filed was overpaid:

=IF(B11<0,"Your payments for "&B2&" came to £"&TEXT(-B11,"#,##0.00")&" more than the tax due. HMRC usually keeps a credit like this on your account and sets it against your next bill unless you ask for it back, so we'll check your statement before you pay, as you may owe less.","")

In B25 and B26, the reduced figures and the catch, only if B20 says Yes:

B25: =IF(B20="Yes","If we reduce your payments on account, that becomes £"&TEXT(B16,"#,##0.00")&" by Friday 29 January 2027 and £"&TEXT(B17,"#,##0.00")&" by Friday 30 July 2027, which is £"&TEXT(B18,"#,##0.00")&" less on each date.","")
B26: =IF(B20="Yes","The catch: if your 2026 to 2027 bill turns out like last year's after all, HMRC charges interest on the shortfall. As a rough example at an interest rate of "&TEXT(B8,"0.00%")&", that would be about £"&TEXT(B19,"#,##0.00")&", if both shortfalls are paid on 31 January 2028.","")

In B27, the line every client gets: what happens if the final bill is higher, and the interest rate with a link to the current one:

="If your final bill for 2026 to 2027 is higher than what you've paid towards it, the rest is due by 31 January 2028. If a payment is late, HMRC charges interest at its late payment rate, "&TEXT(B8,"0.00%")&" in these figures. The rate moves with the Bank of England base rate, and the current one is on GOV.UK: https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates"

Finally, leave row 28 empty, type “Email to copy (this cell and the ones below it)” in A29, and put this in B29. It stacks the lines that apply and skips the blank ones, so B29 and the cells below it hold the email, ready to copy. Leave B30 to B33 empty for it to fill.

=FILTER(B23:B27,B23:B27<>"")

With the example figures, the sheet says: payments on account apply (12.5% paid outside Self Assessment); the balancing payment is £2,400; each payment on account is £4,200; so £6,600 is due by 31 January 2027 and £4,200 by 31 July 2027. Reduced to half of £6,000, that becomes £5,400 and £3,000, £1,200 less on each date. If the bill turns out to be £8,400 after all, the rough interest at today’s 7.75% is £139.88. B20 says Yes, B21 says None, B24 is blank, and B29 down holds four lines: B23, B25, B26 and B27.

What this means for you: the thinking happens in the sheet, where you can see it. If a sentence looks wrong, the fix is a figure in B2 to B8, not an argument with a chatbot.

Step 4: Decide whether to reduce

GOV.UK lets you ask HMRC to reduce payments on account if your “business profits or other income goes down”, “the tax relief you are entitled to goes up”, or “tax deducted at source is more than the previous tax year”. You can do it online (sign in, choose the latest return, then “Reduce payments on account”) or by post on form SA303 (GOV.UK, GOV.UK). You must claim by 31 January after the end of the tax year, so 31 January 2028 for 2026 to 2027.

Reducing is a loan from HMRC that only costs you if you’re wrong. “If you reduce your payments on account and your tax bill is higher than expected, you’ll be charged interest on the difference” (GOV.UK). B19 puts a rough number on that risk. On the example, at today’s rate of 7.75%, getting it wrong costs about £140 for keeping £1,200 back on each date. Getting it right costs nothing. And a guess isn’t a reason: HMRC’s manual says a penalty can be charged if someone fraudulently or negligently makes an incorrect statement in a claim to reduce (HMRC manual SALF303, on GOV.UK). Honest mistakes made in good faith aren’t penalised, but keep a note of why you expected a lower bill.

If you reduce after you’ve already paid the first payment on account, the overpayment doesn’t disappear. HMRC’s manual says it “remains on the taxpayer record and will be allocated against future liabilities unless the taxpayer asks for a repayment” (HMRC manual SAM1070, on GOV.UK). In practice that usually means the next payment due, which is often July’s. That’s how the MSE regulars read the story above, but it’s their working, not an HMRC rule. Check the statement before paying, and if it doesn’t add up, ask your accountant or HMRC.

What this means for you: reduce when you have a real reason, write the reason down, and look at the statement before July. It may need far less than you think, or nothing at all.

Step 5: If MTD is involved, check both accounts

This is the AccountingWEB “lost” payments on account. GOV.UK says that if you use Making Tax Digital for Income Tax, you “must pay any amount listed as due in either your: Self Assessment account / Making Tax Digital for Income Tax account”, and that your Self Assessment statement “may show an amount that has been ‘transferred to digital’. This means the amount has been moved into your new Making Tax Digital for Income Tax account” (GOV.UK).

So before telling a client HMRC has lost their money, sign in and look at both accounts. Another reply on the thread made a useful point: payments due and payments made can show on different pages, so check the statements as well as the overview. In the AccountingWEB thread the client wasn’t due to start MTD until April 2027. One reply wondered whether HMRC had set her up on the new system early. Nobody had confirmed it when the thread went quiet, so ask the client whether they’ve signed up for anything, then ask HMRC.

From the tax year you join MTD, the new late payment penalties apply, but GOV.UK says “Late payment penalties do not apply to any payments on account that you may need to make.” Late payment interest still does, from the first day a payment is late (GOV.UK).

What this means for you: “transferred to digital” means moved, not lost. Two accounts, two places to look. Annoying, but cheaper than a panic.

Step 6: Pay the right amount by the right day

Pay through the HMRC online account, your bank or the HMRC app. For a weekend deadline, pay by Faster Payments or card, or make sure the money reaches HMRC by the Friday. Late payment means “You’ll be charged interest and may be charged a penalty” (GOV.UK).

If two big lumps a year don’t suit the cash flow, GOV.UK says you can set up a Budget Payment Plan: weekly or monthly Direct Debit payments towards your next bill. You must be up to date with your last Self Assessment bill, and you can pause payments for up to 6 months (GOV.UK). If the bill isn’t overdue yet, that’s the plan to use. Time to Pay is for tax that’s already due and you can’t pay (GOV.UK). That’s why, on another MSE thread, someone trying to set up a plan before January found the Time to Pay link just said they had nothing to pay (MSE forum).

What this means for you: saving up monthly beats finding £6,600 down the back of the sofa in January.

What’s changing in 2029

At Budget 2026 on 28 October 2026, the government announced that, after consultation, from April 2029 “taxpayers who already make Payments on Account will make smaller, more regular contributions towards their tax bill throughout the year” (GOV.UK, Budget 2026). HMRC’s summary adds that payments will be automated, with “eligible taxpayers able to choose to pay through PAYE”, and that the government “will continue to work with taxpayers and stakeholders on detailed design and implementation” (GOV.UK).

It’s announced, not law yet, and the detail is still being designed. Nothing changes for 31 January 2027 or 31 July 2027. Pencil 2029 in. Don’t ink it.

The copy-paste prompt

Fill in the sheet first. Then select B29 and the cells below it that have text, copy, and paste the lines on the empty line under “Sheet lines:” in the prompt below. Copy column B only, not the labels. The sheet has no names, addresses, UTR or National Insurance number in it, so keep it that way. Add the client’s name to the email yourself, after it’s written.

You are helping an accountant send a client a short email about their payments on account. A Google Sheet has already done every sum and made every decision. Your only job is to turn its lines into a short email.

Sheet lines:

Write the email like this:
1. Start with: Hi,
2. Copy each sheet line above exactly, word for word, in the same order, each as its own short paragraph. Keep every figure, date, percentage and link exactly as written.
3. If a sheet line is blank, leave it out and do not mention it.
4. Finish with: Any questions, just reply to this email.
5. Then leave a blank line and end with Thanks, on a line of its own.

Rules:
- Give only the email text, starting with Hi,. No subject line, no heading and nothing before or after the email.
- Write the link as plain text, exactly as it is in the sheet line.
- Do not work anything out, change any figure, reword any sentence or add any sentence of your own.
- No square brackets anywhere and no placeholders.
- British English.

Before you send it:

• Every sentence should match the sheet, word for word. The AI’s only job is layout. If it has dropped a line, changed a word or added one of its own, use the sheet’s wording. Small AI tools do sometimes drop a word or copy an instruction into the email, so this read-through matters.
• Tidy the top and the link, then relax. Some chat tools put the reply in an email box. If what you copy starts with “Email” or a subject line, delete those lines so it opens with “Hi,”. If the GOV.UK link pastes in wrapped in square brackets, with the address repeated in round brackets after it, that’s usually just the chat tool’s formatting, not a changed address. Delete the extras so one plain link is left, or copy the link from B27. And check “Thanks,” sits on a line of its own.
• Right year? B2 should be the year on the tax calculation (SA302) you used, and the figures should come from that one, not the year before.
• Look at the statement too. If the client is in Making Tax Digital for Income Tax, or something shows as “transferred to digital”, check both accounts before you send. The sheet can’t see HMRC’s records.
• Rate still 7.75%? If the late payment rate has moved, update B8 and copy the lines again.
• Later years. The dates in the formulas and labels are for payments due in January and July 2027. Change them for later years.

What can go wrong?

• Using the wrong year’s figures. The payments on account for 2026 to 2027 come from the 2025 to 2026 tax calculation. It’s easy to pick up the previous one.
• Putting capital gains or student loan into the payments on account. They belong in the balancing payment only.
• Reducing on a hunch. A reduction you can’t explain is just a bet with interest attached. Keep a note of why you expected a lower bill.
• Assuming an overpayment rolls on to next January. HMRC keeps it on the account against future bills unless you ask for it back, which usually means the next payment due. Check the statement rather than the tax overview.
• Missing a weekend deadline. 31 January 2027 is a Sunday and 31 July 2027 is a Saturday. Unless you use Faster Payments or a card, the money must reach HMRC by the Friday.
• Thinking HMRC has lost the money. If MTD is involved, check both accounts for “transferred to digital” first.
• Copying the labels or the wrong block into the prompt. Copy B29 down only. The labels in column A are for you, not the client.
• The rules changing. Rules, dates and the interest rate here are as GOV.UK states them on 29 October 2026, including what Budget 2026 announced. Check the linked pages before you rely on them.
• This isn’t tax advice. The sheet applies GOV.UK’s rules to the figures you give it. For anything unusual, such as a year with a big one-off gain or income that has stopped, ask an accountant.

If you’re also getting ready for Making Tax Digital, our free MTD readiness checklist covers the thresholds, exemptions and what to do before April 2027. One practical automation like this, with the £ and the hours it saves, lands in your inbox every Friday if you join our free email.

Frequently asked questions

Sources

1. GOV.UK (HMRC): Understand your Self Assessment tax bill: payments on account
2. GOV.UK (HMRC): Understand your Self Assessment tax bill (if you use Making Tax Digital for Income Tax)
3. GOV.UK (HMRC): Claim to reduce payments on account
4. GOV.UK (HMRC): Pay your Self Assessment tax bill
5. GOV.UK (HMRC): Pay your Self Assessment tax bill: pay weekly or monthly (Budget Payment Plan)
6. GOV.UK (HMRC): If you cannot pay your tax bill on time
7. GOV.UK (HMRC): HMRC interest rates for late and early payments
8. GOV.UK (HMRC internal manual): Self Assessment legal framework SALF303, payments on account
9. GOV.UK (HMRC internal manual): Self Assessment manual SAM1070, reducing payments on account after paying
10. GOV.UK (HMRC): Penalties for Making Tax Digital for Income Tax
11. GOV.UK (HMRC): Budget 2026 overview of tax legislation and rates (OOTLAR), 2.31 (28 October 2026)
12. GOV.UK (HM Treasury): Budget 2026 (28 October 2026)
13. AccountingWEB Any Answers: HMRC has lost client payments on account
14. MoneySavingExpert Forum: rules about second payment on account
15. MoneySavingExpert Forum: worried about reduced payment on account

This guide is general information, not legal, tax or financial advice. Tool prices and screens change; we re-check every guide regularly. Spotted something out of date? Tell us and we’ll fix it.