BIRDS ACCOUNTANTS
BIRDS ACCOUNTANTS
Self Assessment · sole traders · creators · UK-wide
Why your first tax bill can look bigger than expected, and how to plan for it.
Written by Nicola Bird, CIMA-qualified accountant. Last checked 10 November 2026.
Payments on account are advance payments towards your next tax bill, including Class 4 National Insurance. Each one is usually half of the tax you owed for the previous year. They are due by 31 January and 31 July.
You must make them unless either:
Say it is your first year self-employed and your 2025/26 tax bill is £3,000:
That first January is the one that catches people out. Setting aside a percentage of every payment you receive makes it much easier.
Yes, if you expect your profit to fall this year. You can ask HMRC to reduce them in your online account or on form SA303. Be careful: if you reduce them too far and your real bill is higher, HMRC charges interest on the shortfall. If you earn less than estimated, any overpayment is refunded or set against your next bill.
Do not ignore it. HMRC's Time to Pay service lets many people spread a Self Assessment bill into monthly instalments. Interest still applies, but it avoids things escalating. I can help you work out what you owe and set it up.
These are the rates for England, Wales and Northern Ireland. Scotland has its own Income Tax bands, but National Insurance and the allowances are the same.
| 2025/26 | 2026/27 | |
|---|---|---|
| Trading allowance (gross self-employed income) | £1,000 | £1,000 |
| Personal Allowance (tax-free income) | £12,570 | £12,570 |
| Income Tax basic rate (£12,571 to £50,270) | 20% | 20% |
| Income Tax higher rate (£50,271 to £125,140) | 40% | 40% |
| Class 4 National Insurance on profits £12,570 to £50,270 | 6% | 6% |
| Class 4 National Insurance on profits over £50,270 | 2% | 2% |
| Class 2 small profits threshold (Class 2 treated as paid above this) | £6,845 | £7,105 |
| Voluntary Class 2 if profits are below the threshold | £3.50 a week | £3.65 a week |
Making Tax Digital for Income Tax: if your qualifying income (self-employment plus property, before expenses) was over £50,000 in 2024/25, you have had to use it since 6 April 2026. Over £30,000 in 2025/26 means you start on 6 April 2027, and over £20,000 in 2026/27 means you start on 6 April 2028. Sources: GOV.UK National Insurance rates, GOV.UK Income Tax rates, GOV.UK Making Tax Digital.
Advance payments towards your next Self Assessment tax bill. Each is usually half of last year's bill, due by 31 January and 31 July.
In your first year with a bill over £1,000, you pay the full bill for last year plus the first payment on account for this year, both on 31 January.
Not if last year's Self Assessment bill was under £1,000, or if more than 80% of the tax you owed was already paid, for example through your tax code.
Yes, if you expect your income to fall. Ask HMRC through your online account or form SA303. If you reduce them too much, HMRC charges interest on the difference.
If your real bill is more than your payments on account, the difference is a balancing payment due by 31 January after the tax year ends.
They include Class 4 National Insurance as well as Income Tax.
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Related: Online accountant for sole traders · Earnings and tax forecaster · GOV.UK: payments on account
This page is general information, not tax advice. Get in touch about your own situation.
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