Why your January tax bill is 150% of your tax
The demand is two separate things added together — this splits them apart.
Income Tax plus Class 4 NI, after tax already deducted at source
PAYE from a job, CIS deductions, bank interest
In the bill, but never used to work out payments on account
What you paid last January and July towards this year
Due by 31 January 2028
£9,000.00
then £3,000.00 by 31 July 2028
Why the January bill is bigger than your tax
Balancing payment
£6,000
For the year you just filed
Each payment on account
£3,000
Half of this year’s bill, towards next year
Total over 12 months
£12,000
| Balancing payment for the year filed | £6,000.00 |
|---|---|
| First payment on account for the year in progress | £3,000.00 |
| Total due in January | £9,000.00 |
Three things that are never in a payment on account
If this year will be worse than last
Figures for the 2026/27 UK tax year. Rules last checked against HMRC on 2026-08-28. See every source.
How to work out what you owe in January
The first January after a profitable year is when most self-employed people discover payments on account, usually by opening a demand for half as much again as they expected. The bill is not a mistake and it is not a penalty: it contains the balancing payment for the year you have just filed, plus the first advance payment towards the year you are already in. This calculator separates the two using your own figures, and shows the July payment that follows. It also flags the three amounts that never form part of a payment on account but still have to be paid in full — Class 2 National Insurance, student loan repayments and Capital Gains Tax.
- 1Enter the Income Tax and Class 4 National Insurance due through Self Assessment for the year you have filed.
- 2Enter any tax already deducted at source, such as PAYE from an employment or CIS deductions.
- 3Enter Class 2 National Insurance, student loan and Capital Gains Tax separately — these are excluded from the advance calculation.
- 4Enter what you already paid on account towards this year, then read the January and July figures.
FAQ
Why is the January bill more than the tax I owe?
Because it is two payments in one envelope. The first is the balance of the year you have just filed. The second is an advance of half that amount towards the year you are currently in, which HMRC assumes will be similar. In your first year of Self Assessment nothing has been paid in advance, so the two together come to 150% of the year’s tax.
When do I not have to make payments on account?
In two situations: if the tax you owed through Self Assessment was under £1,000, or if more than 80% of your total tax for the year was already collected at source — usually through a PAYE tax code. Meet either test and you simply pay the bill in full with nothing in advance.
Can I reduce my payments on account?
Yes, if you expect this year to be worse than last. But if you reduce them too far, HMRC charges interest on the shortfall running back to the original due date, not from when the position became clear. Base the claim on real figures rather than optimism.
Why is my student loan not included in the advance payment?
Student loan repayments, Class 2 National Insurance and Capital Gains Tax are excluded from the payment on account calculation by design — but they are still due in full with the balancing payment. This is the most common reason a January bill comes in higher than someone’s own forecast.