What Are Interim Payments?

Payments on Account

In the UK personal tax system, if your tax bill is more than £1,000 and less than 80% of your tax has been collected at source, HMRC will ask you to make advance payments on account towards your next tax bill.

These are called payments on account, and they are due in two parts:

First payment — 31 January

Second payment — 31 July

Each payment is 50% of your previous year’s tax bill.

So if your 2023 to 2024 tax bill was £20,000, you will pay £10,000 in January and another £10,000 in July, before your next tax return is even submitted.

These are in addition to the balancing payment for the current year, which is also due in January.

Who Does This Affect?

This applies to many professionals who:

• Operate as sole traders or in partnerships
• Take income from property, dividends, or freelance contracts
• Receive minimal PAYE income and rely on profit distributions or fees
• Work seasonally or have irregular income patterns
• If your tax is not automatically deducted through PAYE, this system likely affects you.

Why This Causes Problems

The system assumes that next year’s income will be roughly the same as the last.

But for many professionals, that is rarely the case.

You may have had:

• A high income year due to a one-off bonus or deal
• A shift in business structure or hours
• Planned leave, illness, or maternity
• A downturn or planned sale

In those cases, your payment on account might be too high, creating pressure you do not need.

It can also work the other way…

You may underpay if your income has increased, meaning a large balancing payment next January.

What You Can Do About It

If your income is likely to drop, you can apply to reduce your payments on account using form SA303 or via your online tax account.

But this must be based on realistic projections and professional advice.

If you reduce too far and underpay, HMRC will charge interest and possibly penalties.

If your income is rising, you may want to plan for a higher balancing payment in January, and avoid a cash flow squeeze.

What We Recommend at Signature Concierge

We work with professionals who cannot afford to guess.

Whether you are a consultant, a director, or a partner in a professional services firm, we recommend:

• Reviewing your projected income in the summer
• Adjusting payments now if you are eligible
• Creating a cash buffer for January
• Coordinating with your accountant before the second payment is due in July

This is not just good housekeeping.

It is about reducing stress, avoiding surprises, and making sure your financial planning matches your real income — not a tax system’s assumptions.