“Payment on account” are advance payments towards your tax bill for self-employed individuals and those who receive income that is not taxed at source. Under this system, taxpayers are required to make two advance payments of income tax, known as 'payments on account', towards their tax bill for the following tax year. Each payment on account is calculated as half of the previous year's tax bill and is due on two specific dates:

• The first payment on account is due on January 31, which is the same deadline for submitting the previous year's self-assessment tax return.
• The second payment on account is due on July 31, which is six months after the first payment on account deadline.

These payments are based on the assumption that the taxpayer's income will be the same in the current tax year as it was in the previous tax year. If the taxpayer's income has decreased, they can apply to reduce the payments on account. If the taxpayer's income has increased, they may need to make a further payment to cover the additional tax owed. If you reduce payments on account by too much then HMRC will charge late payment interest. The interest rate is tied to the Bank of England’s base rate When the self-assessment tax return for the following year is submitted, any overpayment or underpayment of tax is reconciled. If the taxpayer has overpaid, they will receive a refund. If they have underpaid, they will need to pay the additional amount owed. Payment on account does not apply if :

• your last Self Assessment tax bill was less than £1,000
• you paid more than 80% of the previous year’s tax you owed, for example through your tax code or because your bank had already deducted interest on your savings