The first Self Assessment bill is a shock for many new sole traders. They set aside enough for a year's tax, then find HMRC wants half as much again. That extra is a payment on account: an advance toward the following year.
How payments on account work
If your Self Assessment bill is £1,000 or more, and less than 80% of your tax was already collected at source (for example through PAYE), HMRC asks for two advance payments toward next year, each half of this year's bill. They're due on 31 January and 31 July.
A 2026/27 example
Personal allowance
2026/27 allowanceequals£12,570
Income Tax on profit
bands applied to £45,000equals£6,486.00
Class 4 NI
6% × £32,430equals£1,945.80
Total on profit
£6,486.00 + £1,945.80equals£8,431.80
For someone whose first trading year is 2026/27, the bill due on 31 January 2028 is the £8,431.80 for that year plus the first payment on account of £4,215.90 toward 2027/28: £12,647.70 in one go. Another £4,215.90 follows on 31 July 2028.
After the first year
From the second year it evens out. Each January you pay any balance left for the year just ended plus the first payment on account for the current year, and each July the second. If your profits fall, you can apply to reduce your payments on account, but if you reduce them too far you'll pay interest on the shortfall.
- Save for payments on account from your first invoice, not from your first tax bill.
- A basic-rate sole trader often needs around 15% to 25% of profit for tax and NI.
- Keep the money in a separate savings account so it isn't spent by accident.
Tip: In your first year, aim to save about one and a half times your expected tax bill by the first January. The calculator shows the payment on account figure to plan for.