Skip to main content

The Low Incomes Tax Reform Group (LITRG) are urging for taxpayers to make sure that they budget for any extra tax payments that may come at the same time as their tax returns.

The LITRG have said that in its experience, many newcomers to Self-Assessment fail to realise they may have to pay some money in advance towards their next tax bill on 31st January, too.

‘Payments on account’ (POAs) are payments made towards your following year’s income tax (and Class 4 National Insurance contributions bill, if you are self-employed). If your tax bill for 2016/17 is more than £1,000, you may have to make POAs for 2017/18.

When calculating POA due for 2017/18, you take your tax bill for 2016/17 (not including Class 2 National Insurance contributions, capital gains tax liabilities or student loan repayments) and divide this figure by two. The resulting number is each POA for 2017/18 – one due on 31st January 2018 and the other due on 31st July 2018.

POAs will be taken off the tax due from your next tax return.

If you still have tax to pay for 2017/18 after you have made your POAs, you must make a ‘balancing payment’ by 31st January 2019. If your POAs prove to be more than your eventual tax bill for 2017/18, HMRC will refund the difference to you.

Ready to start your contracting career? With almost 30 years experience in contracting, use our expertise today.

Become an expert

I want to be a contractor

LITRG Chair Anne Fairpo, explained, “Payments on account are intended to help you spread out your tax bill but are easily overlooked. In particular, many newcomers to self-assessment fail to factor in these ‘payments on account’ when budgeting for their first tax bill and are shocked when they owe more money than expected.

“If you think your tax bill will be less for 2017/18 than 2016/17 because (for example) you had less self-employed income, then it is possible to ask HMRC to reduce your payments on account.

“You need a reasonable estimate of the amount you will owe in 2017/18 in order to reduce your payments on account. If you reduce them too much, you could face interest charges, and even a penalty if the claim was fraudulent or negligent.”

She added, “You must tell HMRC if you want to reduce your payments on account. If you simply pay a lower amount to HMRC, this will show on their systems that you have not paid enough and it is likely that they will contact you and you could be liable to pay a fine.”

To find out more about contracting please contact Jaime on 01442 795 100 or email

Why Thousands of Contractors Choose Dolan Accountancy

With over 25 years experience in contractor accountancy helping thousands of contractors, freelancers and the self employed, Dolan Accountancy has the specialist skills, reputation and credibility you can trust.

Working closely with our sister company, Contractor Umbrella, it means we can offer one low cost, fixed fee package at £105 + VAT. This gives you the flexibility of using both our Limited Company Accountancy Services and our award winning Umbrella Service, for one inclusive cost.

If you’d like to find out more about how Dolan Accountancy can help you and your business, please give us a call on 01442 795 100 or email or

We don’t believe in tiered packages or hidden extra fees, instead we aim to give you everything you need, including:

  • Free Company Formation – This is where it all begins. Once you have decided on an available name, we will form your company free of charge (if using our accountancy services) and it will be ready for you to use in as little as three hours
  • Free use of Contractor Umbrella – With IR35 Legislation changes we understand that sometimes you are required to contract via an umbrella company. We will keep your limited company ticking over, while you work margin free via our sister company, Contractor Umbrella
  • A Dedicated Accountant – Your accountant will be there for any company or personal tax advice that you require. We will never outsource work, even to internal teams
  • Free Access to FreeAgent – We offer all of our clients access to FreeAgent, free of charge
  • Free Business Banking – We have decided to waive our commission so our clients can use Tide free of charge for the first year
  • Unlimited IR35 Status Reviews – We will review all of your contracts for IR35 purposes and provide you with our professional opinion as to its status
  • Free Registered and Director’s Service Office Address – Sometimes you just don’t want your home address on display at Companies House. When you sign up to our accountancy services, we will offer the use of our address as an alternative
  • Your Business and Personal Taxation Needs – This includes Company Accounts, Director’s Personal Tax Return, VAT Returns, Payroll, Corporation Tax and Dividend advice, to name just a few

Not Found What You’re Looking For?

Speak to an ExpertLimited or Umbrella?
Take Home Pay Calculator