It’s late July. You’ve just realised the 31 July Payment on Account deadline is days away, and you don’t have the money. Or worse — the deadline has already passed, you didn’t pay, and now you’re waiting for HMRC to notice. Take a breath. This is fixable, and you’re not the only one in this position — the 31 July deadline catches thousands of self-employed people off guard every year because it doesn’t come with the same January fanfare as the main Self Assessment deadline.
Don’t ignore it. HMRC’s systems flag unpaid amounts automatically, and the longer you leave it, the more it costs. Here’s exactly what happens, what it costs, and the three things you can do right now.
If you’re not sure what Payment on Account actually is, read our explainer first: what is payment on account. The short version: it’s an advance payment toward this year’s tax bill, due in two instalments — 31 January and 31 July — each 50% of last year’s tax.
What Happens If You Miss the 31 July Payment on Account
The consequences mirror the main 31 January late payment regime, because a missed Payment on Account is treated as late payment of tax. According to HMRC’s late payment guidance, here’s what kicks in:
| When | What happens |
|---|---|
| 1 August | Interest starts accruing at 7.25% on the unpaid amount, calculated daily |
| 30 days after the deadline | 5% surcharge on the tax still unpaid |
| 6 months after the deadline | Further 5% surcharge on the tax still unpaid |
| 12 months after the deadline | Further 5% surcharge on the tax still unpaid |
So if you owe a £2,000 Payment on Account and don’t pay for 12 months:
- Interest: £2,000 × 7.25% = £145 (approximately, for one year)
- Surcharges: 5% × 3 = £300
- Total extra cost: £445 — on top of the £2,000 you already owed
To see how much your missed payment on account will cost in surcharges and interest, use our Self Assessment penalty calculator.
The surcharges are the expensive part. The interest is bad, but three 5% hits on the unpaid balance is what turns a manageable problem into a crisis. The good news: setting up a Time to Pay arrangement suspends the surcharges (see Step 3 below). Interest continues, but the 5% charges stop.
There is no separate “late filing penalty” for missing 31 July — that £100 automatic penalty only applies to the 31 January filing deadline. The 31 July deadline is a payment deadline only, so the consequences are purely financial (interest and surcharges), not a fixed fine. See our Self Assessment penalties guide for the full penalty ladder.
Step 1: Pay What You Can Now
Even if you can’t pay the full amount, pay something immediately. Every pound you pay reduces both the interest and the surcharge base, because both are calculated on the unpaid balance. According to HMRC’s payment guidance, you can pay online by debit card, bank transfer (Faster Payments), or CHAPS — use your UTR as the payment reference so HMRC allocates it correctly.
For example, if you owe £2,000 and can pay £800 now:
- Interest accrues on £1,200 instead of £2,000
- 30-day surcharge: 5% of £1,200 = £60 instead of 5% of £2,000 = £100
- You’ve saved £40 in surcharges plus reduced your interest
A partial payment also signals to HMRC that you’re engaging, which matters if you later ask for a payment plan.
Step 2: Reduce Your Payments on Account (If Your Income Has Dropped)
If the reason you can’t pay is that your income has genuinely fallen since last year, you can ask HMRC to reduce your Payments on Account. This is not a payment plan — it’s a recalculation of what you owe based on a lower expected income. According to HMRC’s guidance on reducing payments on account, there are two routes:
Option A: Online through your HMRC account
- Log into your HMRC Online account
- Go to the Self Assessment section
- Select “Reduce payments on account”
- Enter the new (lower) amounts you want to pay
- Submit — HMRC updates your payment schedule immediately
Option B: Form SA303 Download and post form SA303 to HMRC. This is the paper route, useful if you can’t access your online account.
When to reduce (and when not to)
Reduce your payments on account if you have a genuine reason to expect lower income this year:
- You lost a major client or contract
- You wound down or stopped a trade
- You took a PAYE job and your self-employed income is now a small side hustle
- You retired or reduced your hours
- Your industry has had a clear downturn
Do not reduce them just to improve cash flow if your income is stable. Here’s why: if you reduce your payments and your actual income turns out to be the same as last year, HMRC charges interest on the underpayment from the original due dates (31 January and 31 July) — not from when you file your return. At 7.25%, that interest can easily wipe out any cash flow benefit. You also still owe the full tax when you file, so you’ve just deferred the problem and made it more expensive.
The rule of thumb: reduce only if you’d be comfortable defending the reduction to HMRC with evidence of why your income dropped.
Step 3: Set Up a Time to Pay Arrangement
If your income hasn’t dropped (so reducing the payments isn’t appropriate) but you simply don’t have the cash right now, a Time to Pay arrangement is your best option. This is HMRC’s official payment plan system. According to HMRC’s Time to Pay guidance, there are two routes:
Option A: Online payment plan (debts under £30,000)
If you owe less than £30,000 across all your Self Assessment debts (balancing payment + payments on account) and have no other outstanding tax debts, you can set up a plan online through your HMRC account. No phone call needed.
Eligibility:
- You owe less than £30,000
- You’ve already filed your return
- You have no other tax debts or Time to Pay arrangements
- You can pay within 12 months
Option B: Phone-based arrangement (debts over £30,000 or complex cases)
If you owe £30,000 or more, or you need longer than 12 months, call the HMRC Payment Support Service on 0300 200 3835 (Monday to Friday, 8am to 6pm). Have ready:
- Your UTR (Unique Taxpayer Reference)
- Your National Insurance number
- Details of your income and expenses
- How much you can afford to pay per month
- A proposed timeline for full repayment
What a Time to Pay plan does and doesn’t do
| Charge | On a plan? | Details |
|---|---|---|
| Late payment interest (7.25%) | ✅ Still accrues | On the unpaid balance until it’s fully paid |
| 30-day late payment surcharge (5%) | ❌ Suspended | As long as you keep up with the plan |
| 6-month late payment surcharge (5%) | ❌ Suspended | As long as you keep up with the plan |
| 12-month late payment surcharge (5%) | ❌ Suspended | As long as you keep up with the plan |
So a plan saves you the 5% surcharges (which could be £300+ on a £2,000 payment on account) but you still pay interest. The sooner you pay off the balance, the less interest accrues. For the full step-by-step guide to Time to Pay, see our HMRC payment plan guide.
If your circumstances change during the plan
If you’re on a Time to Pay arrangement and your situation changes — you lose a client, your income drops further — contact HMRC immediately, before you miss a payment. They can reduce your monthly payments, extend the period, or pause payments temporarily in cases of hardship. If you miss a payment without telling them, they can cancel the arrangement and move straight to enforcement action. See our guide on what to do when you can’t afford your HMRC tax bill for the broader options.
What If You Reduce Payments on Account and You’re Wrong?
This is the riskiest move, so it deserves its own section. If you reduce your Payments on Account (Step 2) and your actual income turns out to be the same as or higher than last year, here’s what happens when you file your next return:
- You owe the full tax — the reduction didn’t reduce your tax, only your advance payments
- HMRC charges interest on the underpayment from the original 31 January and 31 July due dates, at 7.25%
- You may also face late payment surcharges if the underpayment is large enough to trigger the 5% thresholds
For example: you reduced a £2,000 Payment on Account to £500, paid the £500 on 31 July, and your actual bill at year-end turns out to be £2,100. You underpaid by £1,500 on the 31 July instalment. HMRC charges interest on that £1,500 from 1 August — roughly £109 over a year — plus you still owe the £1,500 balancing payment.
The lesson: only reduce if you have evidence your income dropped. If you’re not sure, a Time to Pay plan (Step 3) is safer — it doesn’t require you to claim your income will fall, it just spreads the cost.
How to Avoid the 31 July Surprise Next Year
The 31 July deadline feels like a surprise because it doesn’t come with the same reminders as January. Here’s how to make sure it doesn’t catch you out again:
- Put aside tax as you earn — transfer 25-30% of your self-employment income into a separate savings account as you go. This covers Income Tax, National Insurance, and both payments on account.
- File early — you can file as soon as the tax year ends on 5 April. Filing early tells you your January bill (and your following July payment on account) months in advance, giving you time to save.
- File by 30 December to spread the cost through your tax code — if you owe less than £3,000 and you’re a PAYE employee or pensioner, filing by 30 December lets HMRC collect through your PAYE tax code instead of demanding a lump sum. This can also reduce or eliminate your payments on account. See our check your tax code guide for how this works.
- Check your payment schedule in your HMRC account after you file — the system shows you exactly what’s due on 31 January and 31 July, so there are no surprises.
- Use accounting software — tools like FreeAgent, Account OS, or Pie Tax estimate your tax bill in real time, including payments on account. Under Making Tax Digital, your software will show an estimated bill after each quarterly update — see our MTD software costs guide for options.
The Bottom Line
- Don’t ignore a missed 31 July payment on account. Interest at 7.25% starts on 1 August, and 5% surcharges hit at 30 days, 6 months, and 12 months.
- Pay what you can now — every pound reduces the interest and surcharge base.
- Reduce your payments on account only if your income has genuinely dropped — via HMRC online or form SA303. If you’re wrong, HMRC charges interest from the original due dates.
- Set up a Time to Pay plan if your income is stable but you can’t pay in one go — online if under £30,000, by phone if over. It suspends the 5% surcharges but interest continues.
- Contact HMRC before you miss a payment, not after — they’re far more accommodating when you’re proactive.
- Budget for 31 July all year — put aside 25-30% of self-employment income so the July instalment is already saved.
For the full list of Self Assessment deadlines, penalties, and payment options, see our Self Assessment deadlines and payment hub.
For the full explanation of what Payment on Account is and how it’s calculated, see our payment on account explained guide. For the complete Self Assessment penalty regime (late filing, late payment, interest, and the pay-vs-appeal decision tree), see our Self Assessment penalties guide. For the full step-by-step guide to setting up a payment plan, see our HMRC Time to Pay arrangement guide. For ways to reduce your tax bill in the first place, see our reduce your Self Assessment tax bill hub. For the complete MTD roadmap, see our Making Tax Digital guide.