31 July Tax Deadline – Don’t Overpay

The second Self Assessment payment on account is due soon, with the deadline falling on 31 July. If you’re required to make payments on account, and haven’t yet finalised your tax return for the year ended 5 April 2025, but feel that your tax ought to be less than for the previous year you may wish to consider whether to reduce your payments on account. 

What Are Payments on Account? 

Payments on account are advance payments towards your next tax bill, required if your previous year’s tax bill was over £1,000. These are split into two instalments each year: one by 31 January and the second by 31 July. Each payment is typically 50% of your last tax liability, based on the previous year’s income. 

Why You Might Be Overpaying 

If your taxable income has dropped since last year, your payments on account may be too high, leading to unnecessary overpayment to HMRC and straining your cash flow.  For example, if your business has slowed or you’ve taken less income, your actual tax liability for this year could be much lower than the prior tax year. 

What Can You Do? 

If you’ve made less this year, you could: 

• Reduce your Self Assessment payment: You can request to reduce your July payment on account if you expect your tax bill to be lower. This can be done online through your HMRC account or by submitting form SA303 by post. 

• Improve cash flow: By reducing your payment, you keep more cash in your business rather than waiting for a refund from HMRC. 

• Avoid overpaying HMRC: Only pay what you owe, based on your calculated liability for the year ended 5 April 2025.

• Submit your tax return by 31 July 2025: HMRC will process your tax return and recalculate your payments on account retrospectively to account for the lower tax liability. 

How to Reduce Your Payment 

1. Estimate your tax liability for the year ended 5 April 2025. 

2. Log in to your HMRC online account or ask your Tax Advisor to amend via their Agent Portal. 

3. If you choose to amend it yourself, select your latest Self Assessment return. 

4. Choose ‘Reduce payments on account’ and enter your new estimated amount, along with the reason (such as lower profits). 
Alternatively, complete and post form SA303 to HMRC. 

“If you make an unreasonable claim to reduce your payments on account, HMRC could refuse. However, it is more likely they will accept your declaration as submitted, and if this is found to be incorrect once your liability is calculated you will face interest costs on the shortfall to what it ought to have been. In extreme cases you may also be subject to penalties where the claim has no legitimate basis.” 

What If You Overestimate the Reduction? 

If you reduce your payments and your actual tax bill ends up higher, you’ll need to pay the difference, plus interest on any underpayment. 

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