Tax Payments On Account
The Tax and National Insurance and Payments On Account system will apply to most healthcare practitioners either after the first year or second year in business.
Our guide to the HMRC Tax Payments On Account system.
Income Tax, Class 4 NI, and Student Loan repayments must be paid in full to HMRC by 31st January each year for the previous tax year.
For example: for Tax Year 2024/25, (6th April 2024 to 5th April 2025) Income Tax, Class 4 NI, and Student Loan repayments should be payable in full by 31st January 2026.
So, for many small businesses, there is a delay of nearly 10 months after the tax year has ended, which leaves plenty of time to set the money aside.
But, when the Income Tax & Class 4 NI payable calculation is greater than £1,000, for a tax year, this triggers HMRC’s “Payment On Account“ requirement, so you no longer have the benefit of the 10 months’ delay.
Payments On Account are payable in the January of the tax year itself and then the following July (ie. 6 months later). As the Payments On Account are basically estimates, any final amount payable should be paid by the 31st January following the tax year end.
So, Payments On Account are in the two equal instalments:
• 31st January
• 31st July
• any balance of Income Tax & Class 4 NI still owing (after the Self Assessment has been filed) has to be paid by the following 31st January as usual, and also Student Loan repayments.
For example, the Income Tax and Class 4 NI Payment On Account dates for the 2025/26 tax year (6th April 2025 to 5th April 2026) are:
• 31st January 2026
• 31st July 2026
These Payments On Account are calculated in the final tax calculations for the tax year 2024/25 (6th April 2024 to 5th April 2025).
Any balance of Income Tax and Class 4 NI still owing for 2024/25 (after the Self Assessment has been filed), plus Student Loan repayments, have to be paid by 31st January 2026.
Any balance of Income Tax and Class 4 NI still owing for 2025/26 (after the Self Assessment has been filed), plus Student Loan repayments, have to be paid by 31st January 2027.
How the Payments On Account are calculated
The January and July Payments on Account are calculated at 50% each, of the Income Tax and Class 4 NI due for the previous year.
Example:
For 2024/25, if you have a Tax and Class 4 NI calculation of £1,500, which is payable by 31/1/2026, and this is the first time that your Income Tax and Class 4 NI has been over £1,000, then Payments On Account must start for the following year 2025/26.
In addition to the £1,500 for 2024/25 which must be paid by 31/1/2026, you must also pay Payments On Account (POA) for 2025/26 as follows:
• 31st January 2026 £750 (1st POA 2025/26)
• 31st July 2026 £750 (2nd POA 2025/26)
• any balance of Income Tax & Class 4 NI still owing for 2025/26, and any Student Loan repayments have to be paid by 31st January 2027.
Total payments would be:
• 31st January 2026 £1,500 (the 2024/25 total due) + £750 (1st POA 2025/26) = £2,250 (plus Student Loan repayments)
• 31st July 2026 £750 (2nd POA 2025/26)
This is often a surprise for people of have just started out as being Self Employed. In the example above they would only be expecting to pay £1,500 on 31/1/2026, and now find that a total of £2,250 must be paid on 31/1/2026, and a further £750 on 31/7/2026. So that’s double the Income Tax & Class 4 NI over a 6 month period.
What happens for the next year with Payments On Account?
Continuing the above example, if for 2025/26, (6/4/25 to 5/4/26) the Income Tax and Class 4 NI is finally calculated as £1,800 based on the profit for that year, this is what happens:
• Total Tax & NI Calculation: £1,800
• Payments On Account already paid: £750 31/1/26 and £750 31/7/26 = £1,500
• Balance payable by 31/1/27: £300 (plus Student Loan repayment)
At the same time, HMRC calculates Payments On Account for 2026/27 at 50% of the 2025/26 Income Tax and Class 4 NI calculation, so 50% of £1,800:
• 31st January 2027 £900
• 31st July 2027 £900
• any balance of Income Tax & Class 4 NI still owing for 2026/27 (plus Student Loan repayment) has to be paid by 31st January 2028.
Total payments would be:
• 31st January 2027 £300 + £900 = £1,200 (plus Student Loan repayment)
• 31st July 2027 £900
This shows how the Payments On Account process is catching up with itself, and although the business is growing, there is a heavier tax burden in the first year when the Payment On Account system ‘kicks in’.
Compare:
• 31st January 2026 £1,500 + £750 = £2,250 (plus Student Loan repayments)
• 31st January 2027 £300 + £900 = £1,200 (plus Student Loan repayment)
Student Loan Repayments
Student loan repayments in one year are not taken into the calculation for Payments On Account for the following year.
HMRC Link:
Payments On Account
