Don’t Overpay Tax in July 2025: Could You Reduce Your Self-Assessment Payment on Account?

If you’re registered for Self-Assessment in the UK, this is an important alert about your payment on account that’s due by 31 July 2025.

Understanding how payments on account work — and when you can reduce them — could help you manage your cashflow and avoid paying too much tax too soon.

What Are Payments on Account?

Payments on account are advance payments towards your income tax and Class 4 National Insurance for the current tax year (2024-25).

HMRC usually asks you to make payments on account if your last Self-Assessment tax bill (for 2023-24) was more than £1,000.

You normally pay in two chunks:

  • First payment: by 31 January 2025
  • Second payment: by 31 July 2025

Each payment is about 50% of your previous year’s tax bill.

Example:
If your 2023-24 tax bill was £6,000, your payments on account for 2024-25 would be two instalments of £3,000 each.

The July 2025 Payment

Your second payment on account for the 2024-25 tax year is due by 31 July 2025.

It’s really important to make sure you have enough money set aside. If you miss it, HMRC can charge interest and penalties.

What If Your Income Has Dropped?

If you think your income for 2024-25 will be lower than it was in 2023-24, you might not need to pay as much.

You can ask HMRC to reduce your payments on account.
But you’ll need to give them a sensible estimate of your new, lower income.

⚠️ Warning:
If you guess too low, you might have to make a bigger balancing payment later — and HMRC could add penalties.

Please also see:  https://www.gov.uk/guidance/claim-to-reduce-payments-on-account

How to Reduce Your Payments on Account

You have two ways to apply:

  1. Online:
    Log in to your HMRC online account using your Government Gateway ID and password.
  2. By post:
    Complete a form SA303 and send it to HMRC.

It’s a good idea to apply early — well before the 31 July 2025 deadline — to give HMRC time to sort it out.

Example:

Suppose your 2023-24 tax bill was £6,000.
Your two payments on account for 2024-25 would each be £3,000.

But now you expect your 2024-25 bill to only be £3,000.
You could ask HMRC to cut each instalment down to £1,500 instead.

What You Should Do Now

✅ Review your income:
Estimate what you’ll earn and owe for 2024-25.

✅ Compare:
Check if it’s lower than your 2023-24 figures.

✅ Apply to reduce:
If needed, send your request to HMRC online or using form SA303.

✅ Keep records:
Track your income and expenses carefully — you might need to prove your estimate was reasonable.

Need Help?

We can help you check your figures, estimate your tax and handle the reduction request for you.

Contact us today to avoid overpaying and stay ahead of your July 2025 Self-Assessment deadline!

Sources:

  • HMRC: Payments on account
  • HMRC: Form SA303 – Reduce payments on account

Please see another An Accounting Gem blog: https://www.aag-accountants.co.uk/what-is-an-overdrawn-directors-loan-account-and-why-does-it-matter/

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