HMRC payments on account are advance instalments towards the next Self Assessment bill. They are normally due on 31 January and 31 July, and each is usually half of the previous year’s relevant tax. A newly self-employed partner can therefore face a balancing payment and the first advance instalment together. Build the reserve from a personalised tax projection, not a generic percentage.
Why January can contain two different liabilities
Self Assessment looks backwards to calculate the final liability for a completed tax year. Payments on account also look forwards, using that liability as a basis for advance instalments towards the following year. When those two mechanisms meet, the cash required in January can be materially larger than the amount described simply as “last year’s tax”.
HMRC says each payment on account is usually half the previous year’s relevant tax and the instalments fall in January and July. The calculation can exclude liabilities such as capital gains and can be affected by tax paid outside Self Assessment, so a broad percentage of drawings is only a planning placeholder.
Drawings are cash movements. Taxable profit and the eventual personal tax liability can follow a different timetable. Reconcile all three with the firm’s finance team and your tax adviser.
Build a rolling tax-reserve process
- Obtain an initial personal projection covering partnership profit, other income, pension contributions and relevant reliefs.
- Ring-fence the reserve from household spending and from partnership-capital funding.
- Update the projection when the firm revises profit expectations or makes a material distribution.
- Compare the HMRC statement with the projection well before January.
- Keep the July instalment visible in the plan after the January bill has been paid.
Questions for the firm and accountant
- When will the partnership tax computation and individual allocation be available?
- Does the firm retain or facilitate any tax reserve?
- How do drawings relate to expected profit allocation?
- What happens if profit is revised after distributions?
- Which person is responsible for notifying you of changed estimates?
The objective is not perfect prediction. It is a repeatable process that keeps the likely liability, payment dates and uncertainty visible throughout the year.
Frequently asked questions
When are payments on account due?
HMRC states that the two instalments are due by midnight on 31 January and 31 July. A balancing payment can also be due on 31 January.
Can payments on account be reduced?
HMRC allows a reduction where the expected tax bill will be lower, but interest can apply if the reduction proves excessive. Take advice before changing the amount.
Does every partner make payments on account?
Not necessarily. The rules include exceptions and the tax treatment depends on the individual’s status and circumstances. Check the actual HMRC calculation and obtain tax advice.
Sources and review notes
This briefing uses primary or public-service sources. Rules and their effects depend on individual circumstances and can change.
- HMRC: payments on account
- HMRC: partnership income and Self Assessment
- HMRC: Self Assessment deadlines
Published: 23 August 2026 · Last reviewed: 23 August 2026
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