Can You Reduce Payments on Account Before the 31 July 2026 Deadline?

You may be able to reduce payments on account if you reasonably expect your Income Tax liability for the 2025/26 tax year to be lower than it was for 2024/25. This may be relevant to sole traders, landlords, partners and other Self Assessment taxpayers whose profits or untaxed income have fallen.

The second payment on account for 2025/26 is due by midnight on 31 July 2026. Reducing it can protect your cash flow where HMRC’s figure is likely to be too high, but the claim must be based on a reasonable estimate. If the payment is reduced too far, HMRC can charge interest on the resulting shortfall from the original payment deadline.

This guide explains how the 31 July payment is calculated, when a claim to reduce payments on account may be appropriate, how to submit a claim and what to check before changing the amount requested by HMRC. For a broader understanding of how payments on account fit into the UK personal tax system as a whole, our ultimate guide to personal tax in the UK covers income tax, reliefs and reporting obligations in more depth.

What Is the 31 July Tax Payment?

Self Assessment taxpayers who fall within the payments-on-account rules normally make two advance payments towards their Income Tax and, where applicable, Class 4 National Insurance liability.

• The first payment on account is due on 31 January.
• The second payment on account is due on 31 July.

Each instalment is normally equal to 50% of the previous tax year’s relevant Self Assessment liability. The two instalments are then credited against the final liability for the tax year to which they relate.

For the 2025/26 tax year:

• the first payment on account was due on 31 January 2026
• the second payment on account is due on 31 July 2026 and
• any final balancing payment will normally be due on 31 January 2027.

The January and July 2026 instalments are generally calculated using the relevant Income Tax and Class 4 National Insurance liability reported for 2024/25.

Is the 31 July Payment an Additional Tax Charge?

No. The 31 July tax payment is an advance contribution towards your final 2025/26 Self Assessment bill. It is not a penalty or a separate tax.

When your 2025/26 tax return is completed, HMRC will compare your final liability with the two payments on account already made. You will then either:

• pay a balancing payment if the final liability is higher
• have no further amount to pay if the instalments cover the liability or
• receive a credit or repayment if the instalments were too high.

Who Normally Has to Make HMRC Payments on Account?

HMRC payments on account normally apply where both of the following conditions are met:

• your relevant Self Assessment liability for the previous tax year was £1,000 or more, and
• less than 80% of your total tax liability was collected at source, such as through PAYE.

Payments on account commonly affect:

• sole traders and other self-employed individuals
• landlords with taxable rental profits
• partners in business partnerships
• individuals receiving substantial dividend or savings income
• taxpayers with foreign income, and
• people with several income sources that are not fully taxed before payment.

When Payments on Account Are Not Required

You will not normally need to make payments on account where:

• the relevant amount payable through Self Assessment for the previous year was less than £1,000, or
• at least 80% of your total tax liability was collected outside Self Assessment.

Payments on account generally cover Income Tax and Class 4 National Insurance. They do not normally include Capital Gains Tax or student loan repayments, even where those amounts appear on your final Self Assessment calculation.

How the 31 July 2026 Payment Is Calculated

The payment due on 31 July 2026 is normally the second of two equal instalments towards your 2025/26 liability. Each instalment is usually based on 50% of the relevant amount due for 2024/25.

Example of a Standard Calculation

Suppose your relevant 2024/25 Self Assessment liability was £8,000.

If your final 2025/26 liability is also £8,000, the two payments should cover the bill, subject to any amounts excluded from payments on account.

If the final liability is £9,500, a balancing payment of £1,500 will normally be due on 31 January 2027. If the final liability is £6,000, the account should show an overpayment of £2,000.

When Can You Reduce Payments on Account?

You can ask HMRC to reduce the amount due where you have reasonable grounds to believe your 2025/26 Self Assessment liability will be lower than the amount calculated using your 2024/25 liability.

A payments on account reduction may be appropriate where:

• your self-employed profits have fallen
• your rental profits are lower
• you stopped trading during 2025/26
• you stopped letting a property or experienced a long vacant period
• your allowable business expenses increased
• you are entitled to more tax relief
• a source of taxable income ended
• more of your income was taxed through PAYE, or
• more tax was deducted at source than in the previous year.

A fall in turnover alone does not necessarily justify reducing the payment. The calculation should be based on your expected taxable income, allowable expenses, reliefs, tax rates and tax already deducted.

Can You Reduce Only the 31 July Payment?

Yes. Even though the first instalment was due on 31 January 2026, you can still make a claim before the 31 July 2026 deadline if updated figures show that your 2025/26 liability is likely to be lower.

HMRC will normally recalculate both payments on account. If the revised amount for the first instalment is lower than the amount already paid, the resulting credit may be:

• set against the second payment due on 31 July
• left on your Self Assessment account, or
• repaid, subject to HMRC’s normal repayment checks.

How to Claim to Reduce Payments on Account

You can make a claim to reduce payments on account through your HMRC online account or by completing form SA303 and sending it to HMRC.

Option 1: Make the Claim Online

1. Sign in to your HMRC online account.
2. Open the Self Assessment section.
3. Select the option to reduce payments on account.
4. Enter the revised amount you expect to owe.
5. Provide the reason for the reduction.
6. Submit the claim and check that your Self Assessment statement is updated.

An authorised tax agent can also submit the adjustment through HMRC’s Self Assessment service on your behalf.

Option 2: Submit Form SA303

You can complete form SA303 if you prefer to make the claim by post. The form requires you to provide the proposed revised payments and explain why you expect your liability to be lower.

Allow enough time for HMRC to receive and process a postal application. Submitting the claim close to 31 July may mean that your online statement does not update before the payment deadline.

What Information Should Support the Claim?

Your estimate should be based on the information reasonably available when the claim is made. Depending on your circumstances, this may include:

• up-to-date bookkeeping records
• management accounts or a current profit estimate
• rental income and property expense records
• PAYE income and tax deducted
• expected dividends, savings interest or pension income
• allowable losses and tax reliefs, and
• changes to your business or personal circumstances.

What Is the Deadline for Making a Reduction Claim?

HMRC allows a claim relating to a tax year to be made by 31 January following the end of that tax year.

A claim relating to the 2025/26 payments on account can generally be made by 31 January 2027. However, anyone seeking to reduce the amount they physically pay on 31 July 2026 should act before that instalment becomes due.

Submitting the claim early provides more time to:

• prepare a reliable tax estimate
• resolve any errors in the HMRC account
• check that the reduction has been processed, and
• arrange payment of the correct remaining amount.

How Much Should You Reduce the Payment By?

The revised payments should reflect your reasonable estimate of the qualifying Self Assessment liability for 2025/26.

A simple starting calculation is:

Estimated 2025/26 Income Tax and Class 4 National Insurance, less relevant tax deducted at source, divided by two.

Capital Gains Tax and student loan repayments should not normally be included when calculating the revised payments on account. They may still form part of the balancing payment due on 31 January 2027.

Example of a Payments on Account Reduction

Assume your 2024/25 relevant liability was £10,000. HMRC would normally request:

• £5,000 on 31 January 2026 and
• £5,000 on 31 July 2026.

Your updated records show that the relevant liability for 2025/26 is likely to be £6,000. Each revised payment on account would therefore be £3,000.

Because £5,000 was already paid in January, the account may show a £2,000 credit after the reduction. That credit could reduce or cover part of the amount otherwise due on 31 July.

What Happens If You Reduce Payments on Account Too Far?

You should not choose a lower amount simply because the original payment is unaffordable. A reduction claim must reflect a genuine expectation that the final qualifying liability will be lower.

If your eventual liability shows that the payments should have been higher, HMRC can charge late payment interest on the shortfall. Interest is generally calculated from the original due date of each underpaid instalment.

Example of an Excessive Reduction

Suppose HMRC originally requested two instalments of £4,000. You reduce each instalment to £2,000, but your completed return later shows that each instalment should have been £3,500.

HMRC may charge interest on:

• the £1,500 underpayment of the first instalment from 31 January 2026 and
• the £1,500 underpayment of the second instalment from 31 July 2026.

The interest calculation can apply retrospectively even though the reduction was initially accepted and shown on your HMRC account.

Can HMRC Charge a Penalty for an Incorrect Claim?

A straightforward underestimate does not automatically mean that HMRC will impose a penalty. However, penalties may be considered where a reduction claim is made fraudulently or negligently.

The safest approach is to retain the calculation and evidence supporting the figure used. If your forecast changes, revise the claim and pay any additional amount as soon as possible to limit further interest.

Can You Change a Reduction Claim More Than Once?

There is no fixed limit on the number of times you can adjust a claim where your expected liability changes.

For example, you may initially reduce the payments because your first-half profits were significantly lower. If trading improves before the end of the tax year, you can submit a further adjustment increasing the payments to a more accurate amount.

Updating the claim promptly can reduce the risk of interest arising on an underpayment.

Do You Need to Tell HMRC If Your Profits Increase?

You are not normally required to increase your payments on account simply because your 2025/26 profits are higher than they were in 2024/25.

The statutory instalments remain based on the earlier year’s relevant liability unless you previously submitted a reduction claim that now needs to be revised.

If your final liability is higher than the payments already made, the difference will generally be payable as a balancing payment on 31 January 2027.

Example of Higher Profits

Suppose you paid two instalments of £3,000, giving total payments on account of £6,000. Your completed 2025/26 tax return shows a relevant liability of £9,000.

You would normally have a £3,000 balancing payment due on 31 January 2027. You may also have to make the first payment on account towards 2026/27 on the same date.

Although you do not normally need to notify HMRC in advance, why you should maintain a tax reserve becomes clear in situations like this, setting aside additional funds can prevent the January payment from causing avoidable cash-flow pressure.

What Happens If the 31 July 2026 Payment Is Late?

HMRC normally charges late payment interest from the day after an unpaid instalment becomes due until the outstanding amount is paid.

The late payment interest rate can change because HMRC links it to the Bank of England base rate. Taxpayers should check the current rate when reviewing an overdue payment rather than relying on an older published percentage.

Late payment penalties and interest are separate. The precise penalty treatment can depend on the type of Self Assessment amount outstanding and the penalty regime applying to the taxpayer. A late or underpaid payment on account will, at minimum, normally attract interest.

What If You Cannot Afford the Payment?

If you’re struggling to fund your July tax payment, do not submit an unsupported reduction merely because the payment is difficult to afford. Instead:

• check whether the payment has been calculated correctly;
• prepare an updated estimate to see whether a genuine reduction is available;
• pay as much as you reasonably can by the deadline; and
• contact HMRC promptly about payment support if an amount remains outstanding.

HMRC may offer a payment arrangement in suitable circumstances, although interest may continue to accrue. The availability and terms of an arrangement depend on your tax position and ability to pay.

Should You File Your 2025/26 Tax Return Before 31 July?

You can submit your 2025/26 Self Assessment return at any time after 6 April 2026 once you have the information needed to complete it correctly.

Filing before the 31 July deadline can be useful because it replaces an estimate with the actual tax calculation. HMRC can then adjust the payments on account based on the completed return.

Early filing may help you:

• confirm whether the July instalment is too high;
• identify any balancing payment due on 31 January 2027;
• identify an overpayment sooner;
• plan for the next January payment; and
• avoid relying on an uncertain projection.

Submitting the return early does not normally bring the statutory payment deadline forward.

Common Mistakes When Reducing Payments on Account

Reducing the Payment Based Only on Lower Turnover

Income Tax for a sole trader is generally based on taxable profit rather than gross turnover. Turnover may fall while profit remains similar if business expenses also decrease.

Ignoring Other Taxable Income

Lower business profits may be offset by higher rental income, dividends, savings interest, pension income or employment income. The estimate should reflect your complete Self Assessment position.

Including Capital Gains Tax in the Calculation

Capital Gains Tax is generally excluded from payments on account. A taxable disposal may still create a separate amount payable with the balancing payment.

Reducing the Amount to Nil Without Evidence

A nil claim may be appropriate where a business has ceased or no relevant liability is expected. It should not be used solely to delay payment.

Assuming an Agent Has Made the Claim

Where an accountant manages your Self Assessment affairs, confirm whether the reduction has actually been submitted and processed. Do not assume that discussing lower profits automatically changes the HMRC account.

Failing to Update the Claim

A reasonable estimate made earlier in the year can become inaccurate. Review the position again before 31 July and revise the claim where later income or profit figures are higher than expected.

Waiting Until the Payment Deadline

A last-minute claim may not appear on your statement immediately, particularly if form SA303 is sent by post. Prepare the calculation and submit the request as early as practical.

Checklist Before You Reduce the 31 July Tax Payment

Before making a claim, check that you have:

1. confirmed that the amount relates to the 2025/26 tax year
2. reviewed your 2025/26 income from all taxable sources
3. updated your business or rental records
4. estimated allowable expenses and tax reliefs
5. included expected Class 4 National Insurance where relevant
6. deducted PAYE and other tax collected at source
7. excluded amounts that do not form part of payments on account
8. recorded the assumptions supporting your calculation and
9. allowed enough time for HMRC to process the adjustment.

Making Tax Digital and the July Payment Deadline

Making Tax Digital for Income Tax began applying from 6 April 2026 to qualifying sole traders and landlords within the first mandatory phase.

Making quarterly updates under MTD does not replace the normal payments-on-account rules. An affected taxpayer may still need to:

• maintain digital accounting records
• submit quarterly updates using compatible software
• complete the required year-end process
• make the second payment on account by 31 July, and
• pay any balancing amount by the following 31 January.

The quarterly updates are reporting obligations and should not be mistaken for quarterly Income Tax payment deadlines.

How CIGMA Accounting Can Help With a Payments on Account Reduction

A payments-on-account claim should balance two risks: paying more tax in advance than is reasonably necessary and reducing the instalments so far that interest later arises.

CIGMA Accounting can review your year-to-date records, estimate your 2025/26 liability and submit the adjustment as your authorised tax agent where appropriate. Our accountants can also check whether credits from the January instalment have been correctly applied against the 31 July tax payment.

We support Self Assessment taxpayers through our Fulham Broadway office and across nearby areas including Walham Green and Sands End, as well as through our wider network of accountants across London.

Act Before the 31 July 2026 Payment Deadline

You may be entitled to reduce payments on account where your taxable profits, untaxed income or overall Self Assessment liability for 2025/26 are genuinely expected to be lower than in 2024/25.

Do not reduce the payment using an unsupported estimate. Review all relevant income, expenses, reliefs and tax deducted at source before making the claim. Where the reduction is too high, HMRC can charge interest on the shortfall from the original January and July payment dates.

Submitting an accurate claim before 31 July 2026 can prevent an unnecessary advance payment while keeping your Self Assessment account compliant. Where your figures are uncertain, a current tax estimate can establish whether a payments on account reduction is justified and how much should remain payable.

This article provides general UK tax information for the 2026/27 period. The appropriate treatment depends on your individual income, deductions, reliefs and Self Assessment history.

Reduce Payments on Account Case Study

Rachel, a self-employed marketing consultant, visited our Farringdon office a few weeks before the 31 July deadline. Her business had slowed considerably during the year after several long-term contracts ended, but HMRC was still asking her to pay the same payments on account as the previous year. She was concerned about the impact on her cash flow and wanted to know whether the amount could be reduced.

After reviewing her year-to-date income and expenses, we explained that taxpayers can reduce payments on account when they have reasonable grounds to expect their Income Tax liability will be lower than the previous year’s calculation. We prepared an updated estimate based on her expected taxable profit and showed her how HMRC uses this information when considering a reduction claim.

During the discussion, Rachel asked whether she should simply reduce the payment to an amount she could afford. We explained that any claim to reduce payments on account must be supported by realistic figures rather than cash-flow difficulties alone. If the reduction is excessive and the final tax liability turns out to be higher, HMRC can charge interest on the underpaid amount from the original payment dates.

By the end of the meeting, Rachel understood that reviewing her tax position before the 31 July tax payment deadline was the best way to manage cash flow without creating unnecessary interest charges. Keeping up-to-date records and monitoring profits throughout the year would also make future payment estimates far more accurate.

Reduce Your Payments on Account With Expert Support From Cigma Accounting in London

Understanding when you can Reduce payments on account can help improve cash flow if you expect your current year’s tax bill to be lower than the previous year’s. Cigma Accounting supports clients across the Fulham, including individuals and businesses in Crabtree Lane Area and Fulham Reach, helping taxpayers assess their eligibility and submit accurate claims to HMRC.

If your profits or taxable income have fallen, you may be able to claim to reduce payments on account rather than paying amounts based on last year’s liability. Understanding how HMRC payments on account work, knowing what happens before the 31 July tax payment, and ensuring any payments on account reduction is properly supported can help you avoid paying more tax upfront than necessary while reducing the risk of interest if your claim is incorrect.