Self-employed? 31st July Payment on Account tax deadline looms

With the end of July self assessment payment on account deadline fast approaching for millions of self-employed people, small business owners are being urged to act now to avoid costly penalties.

The second Payment on Account for 2024/25 is due by midnight on 31st July. This affects anyone who submits a Self Assessment tax return and had a tax bill over £1,000 for the previous tax year.

According to HMRC figures, over three million taxpayers are expected to make this advance payment.

Qdos, a long-standing ByteStart partner and tax insurance specialist, is warning that this is a deadline “you can’t afford to ignore” – especially as HMRC charges 8.25% interest on late payments, with the risk of further scrutiny for those who fall behind.

What is a Payment on Account?

Payments on Account are advance contributions toward your next tax bill. They were introduced by HMRC to smooth out cashflow and ensure taxpayers aren’t hit with a large bill all at once.

You’re required to make them if:

• Your last Self Assessment bill was over £1,000, and
• Less than 80% of your tax was collected at source (e.g. via PAYE).

Each payment is calculated as 50% of your prior year’s tax bill (excluding student loan repayments and capital gains tax). The first instalment is paid on January 31st, and the second by July 31st.

As an example, if your total tax bill for the 2023/24 tax year was £4,000, you would have paid £2,000 by the end of January 2025, and now owe the remaining £2,000, which is due by 31st July 2025.

For a full breakdown of key dates and what to pay when, see our guide to self-employed accounting deadlines.

Miss the deadline, and the costs add up fast

Failing to pay on time doesn’t just trigger interest charges – it can also attract unwanted attention from HMRC. The late payment interest rate currently stands at 8.25%, which is based on the Bank of England base rate plus 2.5%.

Seb Maley, CEO of Qdos, explained:
“Missing the Payment on Account deadline can easily snowball into bigger problems. Firstly, HMRC will charge interest on outstanding tax payments, which, at 8.25%, can rack up quickly. You also run the risk of being investigated by HMRC – late payments are one of the many red flags that the tax office looks out for.”

He added:
“Because of the low threshold at which a Payment on Account is due, it impacts millions of taxpayers. From full-time freelancers and small business owners to the growing number of people with side hustles, many of whom might be new to this way of working.”

Can you reduce your payment?

Yes – but it must be based on reasonable grounds. If you expect your profits for 2024/25 to be significantly lower than last year’s, you can ask HMRC to reduce your Payment on Account using form SA303, or directly via your HMRC online account.

However, if you reduce it too far and end up underpaying, HMRC will charge interest on the shortfall – so don’t guess.

How to check and pay

You can view your outstanding balance and make a payment online through your Self Assessment tax account. Payments can be made via:

• Bank transfer (Faster Payments)
• Debit card
• Direct Debit
• Cheque
• Personal credit card (not accepted for business accounts)

HMRC’s full list of accepted payment methods is available online.

Stay compliant and avoid future penalties

Making timely Payments on Account not only prevents interest charges – it also signals good compliance, something HMRC increasingly monitors through real-time data tools and AI risk scoring.

“HMRC has more data, information and tools at its disposal than ever before,” warned Maley.
“Staying on top of your tax obligations and making your Payment on Account on time is important, not just for peace of mind, but to minimise the risk of being investigated by HMRC.”

If you’re newly self-employed and unsure how the process works, check out our Self Assessment tax return guide for practical help.

Further reading:

• Self-employed tax return: what you need to know
• Key accounting deadlines for the self-employed
• GOV.UK: Payments on Account explained
• GOV.UK: Pay your Self Assessment tax bill