Don’t Miss the 31 July Payment on Account Deadline. Avoid an 8.25% Interest Penalty
If you’re self-employed or receive untaxed income, don’t Miss the 31 July payment deadline for your second HMRC payment on account for the 2024/25 tax year. Missing this deadline could result in costly interest charges, currently set at 8.25% on late payments.
What Are Payments on Account?
Payments on account are advance payments towards your upcoming tax bill. They’re typically required if your previous year’s self-assessment bill was more than £1,000 and less than 80% of your tax was collected through PAYE.
You make two instalments each year:
- 31 January – First instalment
- 31 July – Second instalment
Each payment is usually 50% of the previous year’s tax liability. For example, if your tax bill last year was £4,000, you’ll pay £2,000 in January and another £2,000 by 31 July.
Why This Matters
Failing to pay on time can lead to:
- Interest charged at 8.25%, starting from 1 August
- Late payment penalties, starting at 5% after 30 days, with further penalties at 6 and 12 months
These penalties can quickly add up, making late payments significantly more expensive.
Can You Reduce Your Payment?
If you expect your income to be lower this year, you may be eligible to reduce your payments on account. This can be done through your HMRC online account or by submitting a formal request. However, if you reduce your payments too much and underpay, HMRC will charge interest on the shortfall, so be realistic with your projections.
Managing Cash Flow
For freelancers and small business owners, managing cash flow around these deadlines can be challenging. Unlike employees whose taxes are deducted monthly, you’re required to pay a large amount in advance, often before you’ve even earned it. Planning ahead and setting aside funds throughout the year can help ease the burden.
Can’t Pay on Time?
If you’re unable to pay by the deadline, consider setting up a Time to Pay arrangement with HMRC. This allows you to spread your tax bill over a longer period, helping to avoid further penalties and interest. It’s best to arrange this before the deadline to minimise financial impact.
Summary – Don’t Miss the 31 July Payment
- Deadline: 31 July 2025
- Interest on late payments: 8.25%
- Penalties: Start at 5% after 30 days
- Options: Reduce payment if income is down or arrange instalments with HMRC
Being proactive and organised with your payments can help you avoid unnecessary charges and keep your finances in good health. If you’re unsure about what you owe or how to manage it, speak with a qualified tax advisor for personalised guidance.
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