Payments on account: the second-year shock

What it is

Payments on account are advance instalments towards next year's Self Assessment bill. They kick in if your previous year's income tax plus Class 4 NI bill was over £1,000 and less than 80% of your tax was collected at source. Each instalment is 50% of that previous year bill. The first is due on 31 January, the second on 31 July. They are based on income tax and Class 4 only. They ignore Class 2 NI, student loan repayments and capital gains tax.

How it applies to gig workers

Gig workers nearly always trigger payments on account in their second year of Self Assessment, because Uber, Deliveroo, Amazon Flex and Just Eat do not deduct tax at source. The first year, you file, pay the tax, job done. The second 31 January, HMRC wants the full balancing payment for that year and the first 50% payment on account towards the next year, on the same day.

Worked example. A new Uber driver earns £22,000 gross with £4,000 expenses in 2025-26. Profit is £18,000, taxable profit after personal allowance is £5,430. Income tax is £1,086 and Class 4 NI is £325.80, so total is £1,411.80. That is over £1,000, so payments on account apply.

On 31 January 2027 she owes £1,411.80 (balancing payment for 2025-26) plus £705.90 (first payment on account for 2026-27). Total due: £2,117.70. On 31 July 2027, second payment on account: another £705.90. If her 2026-27 profits rise to £23,000, on 31 January 2028 she owes a top-up balancing payment plus the first 2027-28 instalment. That is the "triple tax" feeling.

You can reduce payments on account using form SA303 or the online reduction option if your profits have genuinely dropped, for example you switched to PAYE, had a baby, or your Uber hours collapsed. Never reduce them just because you cannot afford them. If your real bill ends up higher, HMRC charges interest on the underpaid amount at the current late-payment rate.

What you should do about it

• Log into your HMRC account and check the line that says "payments on account" so you know what is due on 31 January and 31 July.
• Put four dates in your diary now: 31 January 2027, 31 July 2027, 31 January 2028, 31 July 2028.
• Move 20% to 25% of every gig payout into a separate tax pot, or 25% to 30% if your profits are higher or your record-keeping is weak.
• If your income has genuinely dropped, use SA303 or the HMRC online reduction to cut the payments honestly.
• If you cannot pay on time, set up HMRC Time to Pay before you miss the deadline, not after.

Last reviewed

19 April 2026

Internal links this page emits (3-5):

• self assessment deadlines 2026 — anchor: "Self Assessment deadlines"
• hmrc time to pay — anchor: "HMRC Time to Pay"
• sa tax shock estimator — anchor: "Self Assessment tax shock estimator"
• class 4 ni — anchor: "Class 4 NI"
• cant afford january tax — anchor: "what if you cannot afford January's tax bill"

Primary source used:

• Research/S2-tax/2.6-payments-on-account.md