Updated on 6 April 2026

Paying tax on self-employed profits and making payments on account

You pay income tax and National Insurance contributions (NIC) on your self-employed profits if you earn above certain thresholds. This page looks at how you pay the tax and National Insurance contributions on your income from self-employment.

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Payment deadlines

You pay tax on your self-employed profits under self assessment. 

Remember you pay Class 4 National Insurance contributions (NIC) at the same time as your income tax. From here on, we will refer to income tax, but that should be assumed to include any Class 4 National Insurance contributions also due. 

For information on Class 2 National Insurance contributions see our National Insurance for the self-employed page.

Generally speaking, you pay your income tax for a tax year in three instalments as follows:

Date Income tax payable
31 January during the tax year 50% of prior year self assessment income tax liability (known as the first payment on account)
31 July following the tax year 50% of prior year self assessment income tax liability (known as the second payment on account)
31 January following the tax year Balance of any income tax due (known as balancing payment), plus the first payment on account for the next tax year

   Student loan repayments due are always paid as part of the balancing payment and are not included in payments on account. For tax years where class 2 National Insurance contributions are due, this will also be paid as part of the balancing payment and is not included in payments on account. This is also the case if voluntary class 2 National Insurance contributions are paid (for the 2024/25 tax year onwards only voluntary class 2 National Insurance contributions can be paid – see our page, National Insurance for the self-employed for more details). Payments on account also do not include any capital gains tax, which is either due as part of the balancing payment, or for residential property gains, within 60 days of disposing of the property. 

Example – payments on account

Marcus has self-employed profits of £20,000 in 2024/25. This means he has an income tax liability of £1,931.80 for the 2024/25 tax year – this is made up of income tax of £1,486 (£20,000 - £12,570 at 20%) and Class 4 National Insurance contributions of £445.80 (£20,000 - £12,570 x 6%).

His income tax (including Class 4 National Insurance contributions) liability for 2025/26 is £3,500. He is not required to pay any Class 2 National Insurance contributions for either tax year. His payments for the 2025/26 tax year are as follows:

Date Income tax payable
31 January 2026 – 1st POA £965.90 (50% of the 2024/25 tax liability)
31 July 2026 – 2nd POA £965.90 (50% of the 2024/25 tax liability)
31 January 2027 £3,318.20, which is £1,568.20 (balancing payment for 2025/26 of £3,500, less 2 x £965.90) plus £1,750 (50% of £3,500, first payment on account for 2026/27).

You will see that in this case for Marcus there are two amounts being paid on 31 January 2027 – the balance due for 2025/26 (£1,568.20) and the first payment on account for 2026/27 (£1,750).

Payments on account can come as a shock and means that your first tax bill may be higher than you might expect. Filing your tax return well in advance of the filing deadline gives you more time to prepare and budget for any surprising tax bills. 

If you do not come within the payments on account regime, then you usually have to pay any amounts that you owe to HMRC by 31 January following the end of the tax year in question. So, if you owe tax and National Insurance contributions on your self-employment income for the 2025/26 tax year this is usually due by 31 January 2027. See our Self assessment page for more information.

Reducing payments on account

It is possible to reduce your payments on account if you estimate that your taxable income will be lower than the previous tax year. This may be the case if your profits have fallen when compared to the previous year. By reducing payments on account, you pay a lower amount in advance. This means that, hopefully, you avoid overpaying tax for the tax year unnecessarily. However, if it later transpires that you have reduced your payments on account by too much, HMRC will charge late payment interest on the difference between the reduced amounts and actual amounts due. 

Example – reducing payments on account

Robert is self-employed and has no other income. His income tax liability for the 2025/26 tax year is £2,800. There is no class 2 National Insurance liability. Robert will need to make payments on account for the 2026/27 tax year. He did not need to make payments on account in respect of the 2025/26 tax year.

By 31 January 2027, Robert will need to pay his 2025/26 income tax liability and the first payment on account for the 2026/27 tax year.

His 2026/27 payments on account will be based on half of his 2025/26 income tax liability. Robert will therefore need to make payments on account of £1,400 by 31 January 2027 (50% of £2,800) and a further £1,400 by 31 July 2027.

Robert knows that his income for the 2026/27 tax year is likely to be much lower than that for 2025/26, so he can claim to reduce his payments on account. Robert works out that he will have an income tax bill for the 2026/27 tax year of around £2,200. 

His payments on account were originally £1,400 each, so the overall reduction will be £600 (that is, £2,800 less £2,200). He therefore claims to reduce each of his 2026/27 payments on account by £300 each to £1,100. Robert pays the first (reduced) payment on account of £1,100 by 31 January 2027.

On 8 February 2027, Robert realises that he has reduced his payments on account by too much. He now thinks he will have an income tax bill for the 2026/27 tax year of nearer £2,500 rather than £2,200.

Robert contacts HMRC to let them know he will need to pay more on each instalment. As he has paid £1,100, he needs to pay a further £150 on that instalment and he will also need to pay £1,250 (50% of £2,500) by 31 July 2027. HMRC received Robert’s additional payment of £150 for his first payment on account on 12 February 2027.

The second payment on account was not due when Robert notified HMRC, so there is no interest to pay on that. But he will have to pay late payment interest on the additional £150, which should have been paid with the first instalment on 31 January 2027. The interest will run from 1 February 2027 to 12 February 2027 – the date HMRC received payment of the £150.

We explain how you can reduce your payments on account on our Self assessment tax payments page.

Preparing for your tax bill

For most people, setting aside a rough percentage (%) of their income each time they are paid, will help make sure that their tax bill, along with the payments on account, can be met. Our table may help you work out your rough percentage using 2026/27 rates, assuming you are using the cash basis, or using traditional accounting (accruals basis) and you get paid promptly. 

Please note that these are based on UK income tax rates. We publish information separately on Scottish rates of income tax and the Welsh rates of income tax.

Projected profit £ Total first year’s tax and Class 4 NIC (excluding Class 2 NIC) £ First year’s payment plus next year’s payments on account £ Rough percentage of profit to save

17,500

1,281.80

1,922.70

11%

20,000

1,931.80

2,897.70

14%

22,500

2,581.80

3,872.70

17%

Example – estimating tax payments

Mabel began trading as an electrician in April 2026. She estimates that in the 2026/27 tax year she will invoice approximately £22,000 and expects her expenses to be around £2,500, resulting in profits of £19,500. Mabel looks at the table above and decides she needs to save around 14% of her projected profit for her tax bill in January 2028. Each time her invoices are paid, she puts some money aside in a separate bank account so that by the end of the tax year, she has saved £2,730 towards her tax bill.

On completion of her accounts and tax return Mabel calculates her actual profits to be £19,000 instead of £19,500 and her 2026/27 tax bill looks like this:

 

£
Net profit from self-employment

19,000
Less personal allowance:

12,570
Taxable income 

6,430
 

 
Tax due on £6,430 @ 20%

1,286.00
Class 4 National Insurance contributions (£19,000 - £12,570) x 6%

385.80
Class 2 National Insurance Contributions 

nil
Total payable for 2026/27 tax year

1,671.80
   
First payment on account for 2027/28 tax year (£1,286 + £385.80 = £1,671.80. £1,671.80 x 50% = £835.90)

835.90
Total due by 31 January 2028 

2,507.70

We can see that Mabel has saved enough to pay what she needs to by 31 January 2028. She has some left over to go towards her second payment on account of £835.90 due on 31 July 2028.

It is important to try and set aside money throughout the year to ensure you can pay your tax bills on time, as late payments can result in interest and in some instances, penalties. A practical suggestion may be to have a savings account that you use so that the money for your tax is kept separate. If a separate account is not possible, you could instead keep a spreadsheet to track how much you have put aside. Doing this at regular intervals, for example, each time an invoice is paid, or perhaps at the end of every month, can help create a reliable habit. If your business has variable income, for example, if your business is seasonal and your turnover is higher at certain times of year, it may be helpful to set aside more during your busy months. 

Tax payments under Making Tax Digital for Income Tax

From April 2026, many self-employed individuals will have to change how they report their income and expenses to HMRC, using a new system called Making Tax Digital for Income Tax. Tax payments under Making Tax Digital remain the same as for self assessment. You will have to file quarterly updates, after which you will be provided with an estimated tax calculation. These calculations may help you budget for your eventual tax liability, but the payment dates will not change, and you are not required to make payments any more often. 

It’s important to note that the calculations provided each quarter under Making Tax Digital are only estimates based on the information included in your quarterly updates. These estimates may not be accurate if any tax adjustments need to be made to arrive at your final taxable profit for the year. 

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