If your income dropped in the 2025-26 tax year, your self assessment payment on account due on 31 July 2026 may be higher than it needs to be. HMRC calculates each self assessment payment on account from last year’s tax bill, so a quieter trading year, a career change or a maternity break can leave you handing over more than you owe, then waiting months to claw it back.
The good news: you can ask HMRC to reduce it, and you can do so right up to the deadline. The catch: if you cut it too far, interest bites hard. The current HMRC late payment interest rate is 7.75% from 9 January 2026. The rate is generally linked to the Bank of England base rate plus 4%. Getting the estimate right matters.
Here is a practical guide for women in business who want to make a considered, evidence-based decision before 31 July 2026.
What the 31 July 2026 self assessment payment on account actually is
Payments on account are advance instalments towards your next tax bill. HMRC splits your expected liability into two equal chunks, due 31 January and 31 July, with any balance settled the following January.
You must make payments on account if your last Self Assessment tax bill was more than £1,000 and less than 80% of your tax was collected at source. That threshold catches most sole traders, freelancers and company directors who take dividends.
The calculation is blunt. HMRC assumes your income for the next tax year will be the same as the previous one. Each Payment on Account is 50% of your previous year’s tax bill. No account is taken of a slower quarter, a client who went bust, or the fact you took three months off after having a baby.
With one month to go, HM Revenue and Customs (HMRC) is reminding millions of Self Assessment taxpayers to prepare for the 2025 to 2026 tax year second payments on account 31 July deadline. Miss it and interest starts accruing the next day.
When it makes sense to reduce your self assessment payment on account
You are entitled to reduce your self assessment payment on account if you genuinely expect your 2025-26 tax bill to be lower than 2024-25. Common reasons include:
- Trading income has fallen, whether through fewer clients, lower day rates or a deliberate scaling back.
- You have taken maternity leave, adoption leave or a career break.
- You moved from self-employment into a PAYE role, so more tax is now collected at source.
- You incorporated, and profits now sit inside a limited company rather than on your personal return.
- You made larger pension contributions, gift aid donations or capital allowance claims that reduce taxable income.
- A one-off gain in 2024-25 (a property sale, a big consulting contract) will not repeat.
None of these are loopholes. HMRC’s system explicitly allows you to submit a revised estimate. What it will not tolerate is a reduction based on nothing more than “I’d rather not pay it right now”.
How to reduce your self assessment payment on account before 31 July
There are two straightforward routes. Both require a defensible estimate of your 2025-26 tax liability.
Option 1: Online through your HMRC account
This is the quickest route. Sign in to your Personal Tax Account via GOV.UK, open your self assessment section and choose the option to reduce payments on account. You enter your revised estimate of the total tax you expect to owe for 2025-26, and HMRC recalculates both instalments. If you have already paid the January one, only the July payment adjusts.
Option 2: Form SA303
Use the SA303 form to apply to reduce your Self Assessment payments on account. You must claim by 31 January after the end of the tax year. For 2025-26, that means the absolute deadline for a claim is 31 January 2027, but leaving it that long is a false economy because interest may already have been charged in the meantime.
Processing time is typically 2-4 weeks, so submit well before 31 July if you go this route. Whichever route you use, keep a record of the estimate and the reasoning. If HMRC queries it later, you will want the figures you relied on.
The risk of reducing your self assessment payment on account too far
This is where careful maths matters. When making the request, you need to provide a reasonable estimate of what your tax liability will be. If you estimate too low and your final liability ends up higher, HMRC will charge interest on the shortfall from the date the original payment would have been due.
At 7.75% (the rate from 9 January 2026), the cost adds up quickly. Reduce your July payment by £3,000 that you actually owe, and by the time you file in January 2027 you could be looking at roughly £116 in interest on top. Reduce by £10,000 in error and it is closer to £390.
A sensible approach:
- Draft a full 2025-26 tax calculation using your actual bookkeeping records to 5 April 2026.
- Include all income streams, not just the obvious one. Dividends, rental income, savings interest above the personal savings allowance and side income all count.
- Deduct legitimate expenses, pension contributions and reliefs.
- Apply current 2025-26 income tax bands and National Insurance rates.
- Add a modest buffer of around 5-10% before setting your reduced figure. It is cheaper to overpay slightly and get a refund than to underpay and be charged interest.
If your business has an accountant, this is exactly the sort of task worth their fee. Even a one-hour review can pay for itself several times over.
What to do if you cannot pay by 31 July 2026
Reducing the payment is not the same as skipping it. If you have genuinely worked through the numbers and still cannot pay in full, HMRC’s Time to Pay service is the route to take.
Better still, for those with bills of up to £30,000, such an arrangement can be set up without even needing to contact HMRC directly. The tax owing needs to be between £32 and £30,000, and the payment plan needs to be set up no later than 60 days after the due date of a debt.
Customers can set up monthly or weekly payment plans and any payments already made via these plans will count towards the overall balance. Interest still runs on the outstanding amount, but you avoid late payment penalties and, crucially, you avoid HMRC enforcement action.
If you owe more than £30,000 or need longer than 12 months, it may still be possible to agree a time to pay arrangement by phoning HMRC’s Self-Assessment Payment Helpline on 0300 200 3822.
Making self assessment payment on account easier next year
The women who find July tax deadlines least stressful all do a version of the same thing: they separate tax from cashflow the moment income lands.
Practical habits worth building:
- Open a separate savings account and transfer 25-30% of every invoice or dividend into it the day it arrives.
- File your 2025-26 return early, ideally between April and June 2026, so you know your actual figure well before the July deadline.
- Use HMRC’s app to view your balance and payment history. Payments can be done via the HMRC app, with nearly two million Self Assessment taxpayers doing so since its introduction in January 2022. It makes it easy for people to pay towards their tax bill, set payment reminders and track and view their payment history.
- Review your business structure annually. If you are consistently paying large payments on account, incorporating may change the profile of your tax bill, though it brings its own admin.
The 31 July 2026 deadline is not something to dread. It is a scheduled cost of running a profitable business. Handled early, with a proper estimate and a clear paper trail, it costs you exactly what it should and nothing more.
For more on managing money as a business owner, read our guide to calculating taxes for self-employment income, our overview of self-employed money management, and the wider picture in our Women in Business: Key UK Facts resource.