Payments on Account Explained for Landlords
Two advance instalments — 31 January and 31 July — each half of last year's bill, once you clear £1,000 and the 80%-at-source test. gov.uk quoted verbatim, plus SA303 and a worked example.
The short answer
Payments on account are two advance instalments — due 31 January and 31 July — each worth half of last year's tax bill, collected towards next year's tax before you've even finished earning the income. They only apply once your bill passes £1,000 and less than 80% of your tax was already collected at source. Landlords with rental income taxed through Self Assessment almost always clear both thresholds, which is why the 31 January bill is often double what a first-time landlord expects.
What a payment on account actually is
gov.uk's own definition is direct: “'Payments on account' are payments towards your next tax bill (including Class 4 National Insurance if you're self-employed).” They are not a separate tax — they are an advance on the bill you haven't finished accruing yet, based on the assumption that next year will look roughly like last year.
The two dates
Both instalments land on dates landlords already have circled for other reasons. gov.uk: “These payments are due by midnight on 31 January and 31 July.” The 31 January date is the one that catches people out, because it is doing double duty — see our full Self Assessment deadlines guide for how it stacks with the balancing payment.
| Date | What's actually due |
|---|---|
| 31 January | Balancing payment for the tax year just ended, plus the first payment on account for the current year |
| 31 July | The second payment on account for the current year |
How each payment is calculated
The maths is simple and, crucially, backward-looking: “Each payment is half of the tax you owed last year.” If your 2025/26 Self Assessment bill was £4,000, each 2026/27 payment on account is £2,000 — regardless of what your 2026/27 rental profit actually turns out to be.
The two thresholds that decide whether you're in scope
gov.uk sets out both conditions for being taken out of the payments-on-account system. The first is a straightforward amount test: “the amount of tax you owed last year was less than £1,000” takes you out of it. The second is about how your tax was collected: “last year you paid more than 80% of the tax you owed outside of Self Assessment (for example through your tax code or because your bank had already deducted interest on your savings)” also takes you out of it.
Most landlords fail both tests by design. Rental profit isn't taxed at source the way employment income is under PAYE, so the 80% figure is usually far too low once rental income is a meaningful part of your total — and a landlord bill clearing £1,000 is common the moment a property is even modestly profitable. Work out where your own numbers land with the rental income tax calculator.
Reducing your payments on account — and the interest risk
If you expect next year's profit to be genuinely lower — a void period, a sale, fewer properties — gov.uk allows you to apply to pay less upfront: “If you know the tax you owe is going to be lower than last year, you can ask HM Revenue and Customs (HMRC) to reduce your payments on account.” The mechanism is a specific form: “Send form SA303 to your tax office.”
Reduce it too far and HMRC charges you for the shortfall. gov.uk's own warning: “If you reduce your payments on account and your tax bill is higher than expected, you'll be charged interest on the difference.” This is the trap in reducing SA303 payments speculatively — it only pays off if your estimate of a lower bill turns out to be right.
Worked illustration
This is an illustration of the mechanics, not a forecast of your own bill. A landlord's 2025/26 Self Assessment bill (tax plus Class 4 NIC, where it applies) comes to £5,600, entirely through Self Assessment with no PAYE income to speak of.
| Step | Illustration |
|---|---|
| 2025/26 balancing payment, due 31 Jan 2027 | £5,600 — the year just ended |
| First payment on account for 2026/27, also due 31 Jan 2027 | £5,600 ÷ 2 = £2,800 |
| Total due on 31 January 2027 | £5,600 + £2,800 = £8,400 |
| Second payment on account for 2026/27, due 31 Jul 2027 | £2,800 |
| If 2026/27's actual bill turns out to be £7,000 | Balancing payment of £1,400 due the following 31 January (£7,000 − £5,600 already paid on account) |
The January figure is the one that surprises new landlords — it is never just “this year's tax.” It is last year's balancing payment stacked on top of half of next year's estimate, in the same instalment.
Where this fits with MTD
Making Tax Digital changes how you report profit during the year — quarterly updates and a final declaration instead of one annual return — but it does not appear to change the payments-on-account dates or mechanics themselves in what we've verified. Check exactly when your own quarterly updates and final declaration fall with the MTD deadline calculator.
gov.uk/understand-self-assessment-bill/payments-on-account, checked 5 Sep 2026 — quoted verbatim: the 31 January/31 July dates, the 50%-of-last-year calculation, the £1,000 and 80% exemption thresholds, the SA303 reduction route and its interest-on-shortfall warning. Deadline dates cross-checked against site/taxdata.py and landlord-self-assessment-deadlines.html (checked 31 Aug 2026 / 4 Sep 2026).
Quick answers
Two advance payments towards next year's Self Assessment bill, due 31 January and 31 July, each equal to half of what you owed last year. They apply once your bill exceeds £1,000 and less than 80% of your tax was collected at source — which covers most landlords, since rental income isn't taxed at source the way PAYE employment income is.
Because 31 January carries two things at once: the balancing payment for the year that just ended, plus the first payment on account for the year ahead — each worth half of last year's bill. The second payment on account then falls separately on 31 July.
Yes, if you genuinely expect a lower bill — gov.uk lets you apply using form SA303. But reduce it too far and HMRC's own rule applies: if your tax bill ends up higher than expected, you're charged interest on the shortfall, so it only pays off if your lower estimate turns out to be accurate.
No — only if last year's Self Assessment bill was £1,000 or more and less than 80% of your total tax was already collected outside Self Assessment. Most landlords with a meaningful rental profit clear both thresholds, but a landlord with a small bill or mostly PAYE income might not.