If you filed your first decent Self Assessment return and nearly fell off your chair at the final number, you’re not alone.
The shock usually isn’t just the tax for the year you’ve already traded. It’s payment on account — HMRC asking for advance payments toward next year too. That’s why people say it feels like being taxed twice.
Payment on account is HMRC’s way of collecting tax in advance. If your Self Assessment bill is above the threshold, HMRC asks for two advance payments toward your next tax year:
Each payment is usually 50% of your previous year’s tax bill (excluding certain items). When you file your next return, HMRC reconciles what you actually owe versus what you already paid on account.
| Item | Amount |
|---|---|
| 2025/26 tax due | £4,000 |
| First payment on account (50%) | £2,000 |
| Total due by 31 January | £6,000 |
| Second payment on account (31 July) | £2,000 |
That January bill is exactly what catches new freelancers and creators. If you didn’t set money aside monthly, cash flow gets tight fast.
Sometimes, yes. If you reasonably expect your upcoming year’s profits to be lower, you can apply to reduce your payments on account.
Common valid scenarios:
But be careful: if you reduce too far and underpay, HMRC can charge interest.
Don’t ignore it. Ignoring creates penalties and interest. Instead:
HMRC is generally more cooperative when you act early and show clear intent to pay.
Use a simple rule: move 30–35% of each payment you receive into a separate tax pot account. Don’t treat that money as spendable cash.
If you’re juggling PAYE + self-employed income, track both streams cleanly so your return is easier and your forecast is less guesswork.
Payment on account feels unfair when you first see it, but it’s predictable once you understand the pattern. The key is planning ahead, keeping records tidy, and acting quickly if you need a payment plan.
Need a practical recovery plan? If a Self Assessment bill has put you under pressure, use the Self-Assessment Recovery Kit (£9) for HMRC letter templates, penalty-minimisation steps, and a week-by-week action plan.
New to all this? Start with the Freelance Starter Kit (£14) for setup checklists and tax admin basics.