← Back to blog
How to Reduce Payment on Account to HMRC (2026): Step-by-Step Guide
Updated: 13 March 2026 · For UK self-employed and freelancers
If HMRC is asking you to make payments on account and you know your income has dropped this year, you don't have to pay the full amount. You can reduce your payments on account — and here's exactly how.
Quick recap: what are payments on account?
Payments on account are advance payments towards your next tax bill. HMRC calculates them as 50% of your previous year's total tax liability, due in two instalments:
| Payment | Due date | Amount |
|---|
| First payment on account | 31 January | 50% of last year's bill |
| Second payment on account | 31 July | 50% of last year's bill |
| Balancing payment | Following 31 January | Difference (if any) |
The problem? If your income drops this year, you're paying based on last year's higher bill. That means you're overpaying — sometimes significantly.
For a full explanation, see our payment on account guide.
When should you reduce?
Consider reducing your payments on account if:
- Your self-employed income has dropped significantly this year
- You've stopped freelancing or closed your business
- You've started employment and most of your tax is now collected through PAYE
- You've increased your pension contributions (reducing taxable income)
- You have higher expenses this year than last
- You received a one-off income boost last year that won't repeat
⚠️ Don't reduce if your income is similar or higher. If your actual bill ends up higher than your reduced payments, HMRC charges interest on the shortfall from the original due date. Only reduce if you have a genuine reason to expect lower income.
How to reduce: step by step
Step 1: Estimate your current year tax liability
Work out roughly what you'll owe this tax year. You need a reasonable estimate of:
- Total self-employed income
- Total allowable expenses
- Any employment income
- Tax reliefs (pension contributions, etc.)
Use our self-employed tax calculator to get a quick estimate.
Step 2: Log in to Government Gateway
Go to HMRC online services and navigate to your Self Assessment account.
Step 3: Find the reduction option
Look for "Reduce your payments on account" in your Self Assessment section. The exact path is:
- Self Assessment → View your account
- Tax years → Current year
- Payments on account → Reduce
Step 4: Enter your estimated amount
HMRC will ask you to enter the total amount you expect to owe for the current tax year. Your payments on account will then be recalculated as 50% of this new amount.
You can also reduce to £0 if you expect no tax liability.
Step 5: Confirm and save the reference
HMRC processes this immediately. Your revised payment amounts will show in your account. There's no approval process — it's automatic.
Worked example
Scenario: Last year you earned £45,000 freelancing and your total tax bill was £8,000. HMRC wants two payments on account of £4,000 each (£8,000 total).
This year: You've taken a part-time job and only expect £20,000 from freelancing. Your estimated tax liability is £3,000.
What to do: Reduce your payments on account from £8,000 total to £3,000 total. Each instalment becomes £1,500 instead of £4,000.
Saving: £5,000 stays in your pocket until the balancing payment confirms the exact amount.
Alternative: reduce by phone
If you can't do it online, call the Self Assessment helpline:
- Phone: 0300 200 3310
- Hours: Monday to Friday, 8am to 6pm
- You'll need: Your UTR, National Insurance number, and your estimated tax liability
Can you get a refund if you've already overpaid?
Yes. If you've already made a payment on account and then reduce it, HMRC will refund the overpayment. You can also submit a claim after filing your actual return if the payments on account exceeded your final bill.
💡 Tip: If you've already paid the first instalment in January and your circumstances have changed, reduce before the second instalment (31 July) to avoid overpaying further.
Risks of reducing too much
- Interest charges: If your actual bill is higher than your reduced estimate, HMRC charges interest (currently around 7.5%) on the underpayment from the original due date
- No penalty: There's no penalty for a genuine incorrect estimate. Interest is the only consequence.
- Cash flow benefit: Even with interest, keeping cash in your account earning savings interest (currently 4-5%) partially offsets the HMRC interest cost
Key dates for 2025/26 tax year
| Date | What |
|---|
| 31 January 2026 | First payment on account due (already passed) |
| 31 July 2026 | Second payment on account due — reduce before this date |
| 31 January 2027 | Balancing payment due when actual return filed |
Related guides
📦 Stay on Top of Your Tax Obligations
The Self-Assessment Recovery Kit includes penalty appeal templates, HMRC letter wording, payment on account reduction guides, and step-by-step checklists to get your tax affairs sorted.
Get the Recovery Kit — £9 →
Landolio helps UK freelancers and small businesses get paid and stay compliant. Home · Blog · Free tools