• Payment on Account is an advance tax payment for the next year, but many don’t see it coming

• It affects sole traders who owe more than £1,000 in tax

• If you don’t plan for it, you might owe twice as much in January

• Filing your Self Assessment early gives you time to prepare or adjust your cash flow

• If your income drops, you might get a refund or reduced payment on account, but only if your return is submitted early enough.

• Our clients get accurate refunds because we handle bookkeeping + tax in one trusted team

• We’re onboarding clients now for 2024–25 Self Assessments, and helping them prep for Making Tax Digital too

Don’t Get Caught Out by Payment on Account.

Every year, we hear the same thing:

“Wait, why is my tax bill double what I expected?”

And the answer is usually just two words: Payment on Account.

If you’re a sole trader and not fully sure what that means (or you’ve been caught out before), this blog post is for you. Let’s break it down in a calm, friendly way

What is Payment on Account?

Payment on Account (POA) is how HMRC collects advance payments towards your next tax bill.

It applies if:

• You’re self-employed, and

• You owe over £1,000 in tax after your return is submitted

Instead of paying it all next January, HMRC asks you to pay:

• Half of next year’s tax bill in advance, split into two instalments:

  • 31st January

  • 31st July

So if your tax bill is £4,000, you might owe £6,000 in January:

• £4,000 for last year

• £2,000 as a Payment on Account for the next year

And that’s where the panic sets in

Why does it catch people out

Most sole traders expect a single tax payment each January.

But if this is your first big year in business, or your income jumped suddenly, you might not be prepared for the extra payment on top.

We’ve seen clients come to us with:

• No cash saved

• No idea about POA

• Big stress right before the deadline

The good news: refunds happen, too

Here’s the flip side… if your income goes down the following year, you may be entitled to a refund from HMRC.

For example:

• 2023–24: You earn well, owe £3,000 in tax, and pay a POA of £1,500

• 2024–25: Your income drops, and you only owe £2,000

• You’ve already paid too much via your POA, and you get money back

We’ve already seen this happen for several clients while preparing 24/25 returns.
But it only works smoothly when the bookkeeping is spot-on and the return is filed early.

In an ideal world, we’d love for our clients to let us handle the bookkeeping, for our clients to complete their tax return questionnaire as soon as the tax year is over. The we start preparing the Self Assessment as soon as we can, then we can let our clients know what their draft Self Assessment looks like, what their tax will be…if this sounds like something you are looking for in an Accountancy Practice, feel free to book a call.

Why filing early makes all the difference

When you file early, you:

• Know exactly what’s owed

• Get time to plan for POA

• Can adjust or reduce it if your income’s lower

• Might get a refund earlier

• Avoid last-minute stress in January.

Filing in December or January often means you just pay what HMRC says, no questions asked. And sometimes, it’s more than you actually owe . So if you’re reading this blog, you haven’t sorted your self assessment for 24/24 and you would like a proactive year next year…book a call. 

Accuracy comes from working with a joined-up team

At BarrettStacey Accounting, we do more than submit forms.

We:

• Handle your bookkeeping throughout the year

• Prepare your Self Assessment accurately

• Review it carefully, looking at MTD thresholds, potential refunds, and POA

• Submit it early

• Explain what’s due and when in plain English

So when a refund shows up? You know it’s correct.
And if there’s a POA due? You’re already prepared.

Now onboarding for 2024/25 Self Assessments

We’re currently taking on new clients for:

• 24/25 Self Assessments

• MTD planning

• System reviews

• Ongoing support

But we’ll likely close the books to new SA clients in early December 
So now’s the time to get ahead

Book a free chat
Or email: ask@barrettstacey.co.uk

Remember…Payment on Account isn’t a penalty, it’s just HMRC’s way of spreading the load.

But it only works in your favour if you’re prepared.

We’re here to help you:

• Get your tax sorted early

• Understand what you owe

• Plan for what’s ahead

• And feel calm and confident about your finances 😊

Please feel free to try out our Perfect Package Finder ☺️ 

Authored by Hayleigh Barrett. Director.

As founder of BarrettStacey Accounting, she leads a friendly, female-led team that focuses on clarity, communication and care, not just compliance.