Why Do Some People Have to Pay Tax in July?

If you’re self-employed, a landlord, or have other untaxed income, you may be required to make a payment on account to HMRC.

These are advance payments towards your next tax bill and are typically due:

• 31 January during the tax year (first payment on account + any balancing payment for the previous year)
• 31 July after the tax year (second payment on account)

So, if you’re being asked to pay in July 2026, it’ll be your second payment on account for the 2025/26 tax year.

You’ll need to make payments on account if:

• Your last Self Assessment tax bill was over £1,000, AND
• Less than 80% of your tax was collected at source (e.g. PAYE)

How Are July Payments on Account Calculated?

Payments on account are based on your previous year’s tax bill, not your current earnings.

The basic rule is that each payment = 50% of your last tax bill (excluding student loan and capital gains tax)

Example:

Let’s say your 2024/25 tax bill was £6,000 (excluding student loan/CGT):

• January 2026 payment: £3,000 (first payment on account)
• July 2026 payment: £3,000 (second payment on account)

👉 Total paid towards 2025/26 in advance = £6,000

What Happens Next?

Once you submit your 2025/26 tax return (due by 31 January 2027):

• If your tax bill is higher, you’ll pay a balancing payment
• If it’s lower, you’ll get a refund or reduce your January 2027 payment.

Can You Reduce Your July Payment?

Yes, if your income has fallen.

You can apply to reduce your payments on account if you expect your bill to be lower than the previous year.

✅ Valid reasons include:

• Business income has dropped
• You’ve stopped self-employment
• One-off income in the previous year

⚠️ Warning:
If you reduce your payments too much and underpay, HMRC will charge interest.

What If You Can’t Afford to Pay in July?

If you’re struggling, don’t ignore it, there are options.

1. Set Up a Time to Pay Arrangement

HMRC may allow you to spread the cost over monthly instalments.

• You can apply online if you owe less than £30,000
• Or speak to HMRC directly

👉 This helps avoid penalties, although interest will still apply

2. Check If You Can Reduce Payments on Account

If your profits are genuinely lower, this could reduce the July payment significantly.

3. Review Your Finances Early

• Planning ahead is key. July payments can catch people off guard.

Common Mistakes to Avoid

❌ Assuming the July payment is optional

❌ Forgetting it’s based on last year’s figures

❌ Ignoring HMRC letters or reminders

❌ Reducing payments without proper evidence

❌ Leaving it until the last minute to seek help

Tips

At CJL Accountancy, we regularly help individuals and business owners manage July tax payments without stress:

✅ Plan cashflow so payments don’t come as a surprise

✅ Forecast upcoming tax bills early

✅ Review whether payments on account are accurate

✅ Set up manageable payment arrangements with HMRC

✅ Avoid unnecessary interest and penalties

Key Takeaways

• The 31 July deadline is for your second payment on account
• It’s based on your previous year’s tax bill, not current income
• You may be able to reduce it if your income has dropped
• If you can’t pay, HMRC support is available, but act early

Need Help with Your Self-Assessment?

If you're unsure whether your payment is correct or worried about paying it, getting professional advice can save you money and stress.

CJL Accountancy supports UK individuals, landlords, and business owners with practical, jargon-free tax advice  exactly when you need it.

👉 Contact CJL Accountancy Today