You are here: Home - Household Bills - News -

Payment on account deadline looms for self-employed

Written by: Emma Lunn
There are fears that self-employed workers may be at risk of not being able to pay their tax bills due to fluctuations in income due to the pandemic.

Payments on account are tax payments made twice a year by self-employed self-assessment taxpayers to spread the cost of the upcoming year’s tax.

If you file a self-assessment tax return, your tax bill was more than £1,000 last year, and less than 80% of your income is taxed using PAYE, you’ll need to make your second payment on account for the 2020/21 tax year by 31 July (the first is paid on 31 January).

This second payment covers the second half of tax for 2020/21. The bill will be based on the tax you paid pre-pandemic in 2019/20, and you’ll be assumed to have earned something similar in both years.

However, thousands of people will still be catching up with payments for the previous tax year through a ‘time to pay’ arrangement, or struggling with their budget due to a fluctuating income during the pandemic.

Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: “If you’re self-employed, there’s a good chance you spend a big chunk of the year dreading the tax bill due on 31 January. Meanwhile, a similar payment, due on 31 July, flies under the radar. This year in particular, millions of people risk being unprepared.

“It’s always terrible timing to have to find this chunk of cash during the summer holidays, which can be one of the most expensive times of year. The pandemic has eased this pressure slightly, because far fewer of us are going away. However, it has piled a heap of new pressures on people making their payments on account – from managing income fluctuations to accounting for the self-employed grant and dealing with the fact that so many people will still be paying off their tax bill from the year before.”

If you earned less in 2020/21 than a year earlier, it’s not too late to apply to reduce your payment on account. You can do this through the Government Gateway or by completing a paper form and sending it to the taxman.

An estimated one in six people make mistakes on their tax return which mean they pay too much tax. If you’ve paid too much in any of the past four years you can correct your tax return, and may be due a refund. If you’re within 35 days of a payment on account being due, HMRC will cut your payment on account instead of issuing a refund.

James Andrews, senior personal finance editor at, said: “If you are still struggling to pay following the reduction in payment, there are plenty of proactive steps you can take to fix the issue; from prioritising your debts, speaking to your creditors, and setting a budget for yourself.

“On this, be sure to track your spending and keep a list of all the different amounts you owe, such as credit card bills, car finance payments and any BNPL (buy now pay later) deals you may have taken on other goods.

“In addition, if you are still struggling with debt, there are services available that can provide independent, impartial advice, such as StepChange Debt Charity, Citizens Advice or the National Debtline.”

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

Flight cancelled or delayed? Your rights explained

With no sign of the problems in UK aviation easing over the peak summer period, many will worry whether holida...

Rail strikes: Your travel and refund rights

Thousands of railway workers will strike across three days this week, grinding much of the transport system to...

How your monthly bills could rise as the base rate reaches 1.25%

The Bank of England has raised the base rate to 1.25% as predicted – the fifth consecutive rise in just six ...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

DIY investors: 10 common mistakes to avoid

For those without the help and experience of an adviser, here are 10 common DIY investor mistakes to avoid.

Mortgage down-valuations: Tips to avoid pulling out of a house sale

Down-valuations are on the rise. So, what does it mean for home buyers, and what can you do?

Five tips for surviving a bear market mauling

The S&P 500 has slipped into bear market territory and for UK investors, the FTSE 250 is also on the edge. Her...

Money Tips of the Week