Why Your First Tax Bill Is 1.5x Bigger Than You Expect
The first time your Self Assessment bill tops £1,000, HMRC asks you to pay it and to pay towards next year at the same time. Here is exactly why the 31 January bill lands around 1.5 times bigger than you planned, and how to budget for it.
- Income tax rates
- 20% · 40% · 45%
- Class 4 NIC
- 6% · 2%
- Trading allowance
- £1,000
The answer first
The first time your Self Assessment bill comes to more than £1,000, HMRC asks you to pay that bill and to make a payment towards next year on the same day. That is why your 31 January bill can be around 1.5 times what you were expecting. This is called a payment on account, and nobody warns you about it. We just did.
A payment on account is not an extra tax. It is HMRC asking you to pay next year’s tax in advance, in two instalments. Once you are through the first year, the bills even out.
How payments on account work
Payments on account are advance payments towards your next tax bill, and you make two of them a year. Whether they apply to you comes down to two simple tests, both based on last year’s figures.
- You are exempt if the tax you owed last year was less than £1,000
- You are also exempt if you paid more than 80% of last year’s tax at source, for example through PAYE
- Fail both tests and payments on account apply to you
- Each payment on account is usually half of last year’s bill
The first payment on account is due by 31 January and the second by 31 July. Each is usually half of last year’s tax bill.
The shock, in pounds and pence
Take a first Self Assessment bill of £3,000. Because it is over £1,000, payments on account kick in. On 31 January you settle the £3,000 for the year just ended and add a first payment on account of £1,500 towards next year, so the total due is £4,500. You expected £3,000 but are asked for £4,500, because half of next year’s estimated tax is bundled in. Same income, but the bill is 1.5 times what you budgeted for.
It is timing, not extra tax. Every payment on account is money off next year’s bill, so once you are through that first January your tax simply arrives in two predictable instalments.
How to manage it, and reduce it safely
You cannot opt out of payments on account, but you can plan for them and in some cases reduce them. Set aside tax as you earn rather than scrambling in January, and target the bigger 1.5x first January figure, not just one year’s tax. If you expect to earn less this year, you can apply to reduce your payments using form SA303.
- Budget from day one by moving a fixed share of every payment you receive into a separate tax pot
- Apply to reduce on form SA303 only when you are genuinely confident income has fallen
- If cash is tight in January, ask HMRC about a Time to Pay arrangement
Reduce too far and HMRC charges interest on the difference, currently the Bank of England base rate plus 4%. Only reduce when income has genuinely dropped, never as a way to delay paying.
What a good accountant does
A year before your first big January, an accountant can tell you the bill is coming, work out your payments on account, set your savings target, and decide whether you can safely reduce. The shock only happens when nobody plans ahead. That is the difference between filing your tax and being looked after.
Common questions
How much is a payment on account?
Each payment on account is usually half of last year’s tax bill. You make two of them, one due by 31 January and one by 31 July, so together they usually add up to the same amount as last year’s bill.
Why is my first tax bill so much bigger than expected?
On your first 31 January you settle the tax for the year just ended and make a first payment on account towards next year at the same time. On a £3,000 bill that means £3,000 plus £1,500, a total of £4,500, which is around 1.5 times what you expected.
Can I reduce my payments on account?
Yes, if you expect to earn less this year you can apply to reduce them online or on form SA303. Be careful not to reduce too far, because if your actual bill turns out higher HMRC charges interest on the difference, currently the base rate plus 4%.
Do I have to make payments on account?
You do unless one of two things is true: your last bill was under £1,000, or more than 80% of your tax was already taken at source through PAYE or similar. If neither applies, payments on account are compulsory.
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For guidance only — this factsheet does not constitute professional advice and is not a substitute for advice based on your specific circumstances. Whilst every care has been taken in its preparation, it may contain errors for which we cannot be responsible. Figures are for the 2026/27UK tax year (England, Wales & Northern Ireland) and may change. Last reviewed 24 April 2026.