1. Check what the instalments cover
Payments on account normally fall due on 31 January and 31 July. Each is half the previous year’s relevant liability, including Class 4 National Insurance where applicable. Tax deducted at source is taken into account. Capital Gains Tax, Self Assessment student and postgraduate loan repayments, and Class 2 National Insurance are excluded from this calculation.
The usual exceptions include a relevant bill below £1,000 or more than 80% of the liability paid outside Self Assessment. Do not simply halve the total shown on your tax calculation: check which elements form the instalment base.
2. Separate the January 2027 payment into two years
Illustration: a first-time filer has £6,000 of 2025/26 liability, all within the payments-on-account calculation, no tax deducted at source and no earlier instalments. Assume no reduction is claimed.
- 31 January 2027: £6,000 for 2025/26 plus £3,000 towards 2026/27, making £9,000.
- 31 July 2027: the second £3,000 towards 2026/27.
If the final 2026/27 relevant liability is £7,000, the £6,000 paid towards it leaves £1,000 to balance in January 2028. Next year’s first instalment may also fall due then. These figures illustrate the timing, rather than calculate a particular reader’s tax.
3. Forecast the liability before claiming a reduction
A reduction may be appropriate if income or business profits fall, available relief increases, or more tax is deducted at source. Consider all income sources together. A lower rental profit could be offset by higher dividends or savings income.
Prepare a short forecast showing expected income, deductible costs, relevant reliefs and tax already collected. For a landlord, retain letting statements and finance-cost records; for a director, reconcile salary and actual dividends. Compare the forecast with the prior-year calculation and explain the change.
You can apply through HMRC’s online service or form SA303. The claim deadline is 31 January following the end of the relevant tax year: for 2026/27, 31 January 2028. Review the position before an instalment falls due rather than waiting for that final deadline.
4. Keep the reduction under review
A valid claim needs a reason and the revised amounts or enough information to calculate them. An inability to pay is not, by itself, a valid reduction reason. HMRC processing a claim does not establish that the forecast is correct.
Reducing too far can produce interest on the shortfall from the relevant payment dates. Update the forecast if income recovers, a contract is renewed or a dividend changes the position. Keep the calculation and the evidence used when making the claim.
5. Reconcile the statement and arrange return preparation
Check HMRC’s statement against your return calculation and actual payments, including dates and references. Keep a simple schedule with columns for the tax year, balance due, advance instalment, payment date and credit received. Ask your adviser to explain differences before treating a statement total as the annual tax cost.
For the wider information pack, use our 2025/26 Self Assessment checklist. UA Tax prepares personal tax returns from £400, with scope and fees agreed upfront. We serve London and clients across the UK. Get in touch with your income sources and deadline so we can agree the appropriate work.
For advice on your own circumstances, see our Self Assessment tax return preparation service and agree the scope before acting.
Official sources and further reading
These primary sources support the framework above. Check the current version before acting because tax law and HMRC guidance can change.