Last updated: 14 October 2026
Do you need to make payments on account if tax is already deducted at source?
Not if most of your tax is already deducted at source. You don’t have to make payments on account if your last Self Assessment bill was under £1,000, or if more than 80% of your total tax was collected at source, for example through PAYE, deducted from interest, or under CIS. HMRC works this out automatically when you file. If neither test is met, you pay two advance instalments towards next year’s bill on 31 January and 31 July.
The two tests
| Test | Payments on account needed? |
| Last year’s balancing payment under £1,000 | No |
| Over 80% of tax deducted at source | No |
| Balancing payment £1,000 or more and less than 80% deducted at source | Yes |
What counts as tax deducted at source
- PAYE on salary and pensions
- CIS deductions for subcontractors
- Tax on income paid net, such as some trust income
- Tax collected through your tax code on other income, such as a small rental profit
Underpayments coded out from earlier years count towards the source figure, which can push you over the 80% line.
Example
Priya earns £60,000 through PAYE, with £11,432 of tax deducted. She has £8,000 of rental profit, adding £3,200 of tax, so her total liability is £14,632. 78% was deducted at source, and her balancing payment is £3,200, so she must make payments on account of £1,600 each in January and July. If she asks HMRC to collect the rental tax through her tax code (allowed for debts under £3,000 if she files online by 30 December), more than 80% would be collected at source and no payments on account would be due.
Reducing payments on account
If you expect lower income next year, you can apply to reduce payments on account in your return or online. If you reduce them too far, HMRC charges interest on the shortfall, so base the figure on a realistic estimate.
Coding out tax
Paying through your tax code spreads the bill over the next tax year and can stop payments on account. You need to:
- Owe less than £3,000
- Be employed or receive a UK pension under PAYE
- File online by 30 December (or paper by 31 October)
Common mistakes
- Paying payments on account that aren’t due because the 80% test is met
- Reducing payments on account without basis and getting interest charges
- Forgetting the July payment
- Not ticking the box to code out a small balance
Check your statement
Your online account shows whether payments on account are due. Check it after filing.
First year of self-employment
In your first year, you won’t have made payments on account, so the 31 January bill can include the whole of the first year’s balance plus the first payment on account for the next year. Budget for this from the start.
Frequently asked questions
Do CIS deductions count?
Yes.
Do pensioners pay payments on account?
Only if the tests aren’t met.
Are student loan repayments included?
No. Class 4 NIC is included, but student loan repayments are not.
Can HMRC refund overpaid payments on account?
Yes, after the return is filed.
Related: whether you need a tax return, how much tax you owe and spreading PAYE payments.
Talk to Accotax
Want this handled for you? Our team at Accotax can help with payments on account. See our Self Assessment tax return service service, or contact us for a free, no-obligation quote.
This page is general guidance based on HMRC rules for the 2026/27 tax year, checked against gov.uk on 14 October 2026. It is not personal advice, so speak to an accountant about your own situation.
