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Payments on Account Explained for Side Hustles (UK)

Checked 30 Oct 2026 against GOV.UK · General information, not tax advice

How payments on account work

GOV.UK describes payments on account as "payments towards your next tax bill (including Class 4 National Insurance if you're self-employed)". They spread the cost into 2 instalments, each half of the tax you owed last year, due by midnight on 31 January and 31 July (GOV.UK).

• They're based on an estimate, usually what you earned the year before.
• If you end up owing more, you pay the rest as a balancing payment by 31 January the following year.
• If you owe less, you may be able to claim a refund.

You don't make them if…

GOV.UK says you must make the 2 payments unless either (GOV.UK):

• the tax you owed last year was less than £1,000, or
• last year you paid more than 80% of the tax you owed outside Self Assessment, for example through your tax code or because your bank had already deducted interest on your savings.

So if you have a job and a fairly small selling side hustle, you may not have to make them at all. The test compares the tax already taken at source with your total tax for the year. Your Self Assessment statement or online account shows whether they apply to you.

Watch the two £1,000s: this test is about the size of your tax bill. The £1,000 trading allowance is about your gross trading income, and is separate.

The first-year "150%" January

If you didn't make payments on account last year, for example because it's your first return, you pay both the full tax for the year and the first payment on account for the next year. GOV.UK's own example (GOV.UK):

• Tax bill for the year: £3,000.
• Due by 31 January: £4,500 (the £3,000 bill plus a £1,500 first payment on account).
• Due by 31 July: £1,500 (the second payment on account).

A reseller example (illustrative figures only)

Made-up, round numbers to show the arithmetic, not tax advice. Say your reselling took off in 2025 to 2026, it's your first return, and your Self Assessment calculation says you owe £1,200. Your employer took £3,500 through PAYE, so your total tax is £4,700 and only about 74% was paid at source. The bill is over £1,000 and less than 80% was paid at source, so payments on account apply:

Now change one thing: if PAYE had taken £5,000 and your Self Assessment bill was £1,100, the total is £6,100 and about 82% was paid at source, so on these figures you wouldn't make payments on account. Your own figures come from HMRC's calculation. For a rough idea of the tax on your profit, try our side hustle tax calculator.

Your reselling slowed down? You can ask to reduce them

If you know the tax you owe will be lower than last year, GOV.UK says you can ask HMRC to reduce your payments on account, giving the amount you expect to make (GOV.UK):

• Online: sign in to your online account, view your latest Self Assessment return, and select "Reduce payments on account".
• By post: send form SA303 to your tax office.

Be realistic: if you reduce them and your bill turns out higher, you'll be charged interest on the difference. Keeping your sales and costs up to date through the year, for example in our free profit tracker, makes the estimate easier.

Checking yours

Sign in to your HMRC online account, choose to view your latest Self Assessment return, then "View statements". GOV.UK says you'll see payments on account you've made and those you need to make. You can also spread the cost with weekly or monthly payments through a Budget Payment Plan, and see all the January dates in our guide to the 31 January 2027 deadline.

Coming from April 2029: more regular payments

The Budget 2026 overview says the government will require Self Assessment taxpayers who make payments on account to make more regular in-year payments towards their final bill from April 2029, with payments automated and an option for eligible people to pay through PAYE. The government says it will keep working with taxpayers on the detailed design (GOV.UK: Budget 2026 overview of tax legislation and rates, section 2.31).

The trading allowance: £1,000 now, £3,000 announced

For the 2025 to 2026 and 2026 to 2027 tax years the trading allowance is £1,000. At Budget 2026 (28 October 2026) the government announced that the trading allowance, and the Self Assessment reporting threshold for trading income, will rise to £3,000 from 6 April 2027 (the 2027 to 2028 tax year), subject to Finance Bill 2026-27 (GOV.UK: Budget 2026 overview of tax legislation and rates, section 1.5). Read more about the trading allowance rising to £3,000.

Quick answers

What are payments on account?

Advance payments towards your next Self Assessment tax bill, including Class 4 National Insurance if you're self-employed. There are 2 a year, due by 31 January and 31 July, and each is usually half of the tax you owed for the previous year.

Do I have to make payments on account?

Not if the tax you owed last year was less than £1,000, or if you paid more than 80% of the tax you owed outside Self Assessment, for example through your tax code. Your Self Assessment statement or online account shows whether you need to make them.

Why is my first Self Assessment bill so big?

If you didn't make payments on account last year, for example because it's your first return, GOV.UK says you pay the full tax for the year plus your first payment on account for the next year. GOV.UK's example: a £3,000 bill means £4,500 by 31 January, then £1,500 by 31 July.

Can I reduce my payments on account?

Yes, if you know your tax will be lower than last year. You can ask HMRC online (in your online account, choose 'Reduce payments on account') or by post with form SA303. If you reduce them and your bill turns out higher, you're charged interest on the difference.

Is the £1,000 payments on account limit the same as the trading allowance?

No. The £1,000 payments on account test is about the size of last year's tax bill. The £1,000 trading allowance is about your gross trading income. They're separate rules that happen to use the same number.

Not sure where you stand?

• Use HMRC's free tool: Check if you need to tell HMRC about additional income.
• Read GOV.UK's guide to telling HMRC about income from online platforms.
• Speak to an accountant or tax adviser. If you're on a low income, the charity TaxAid gives free tax help.

Sources

• GOV.UK: Understand your Self Assessment tax bill – payments on account
• GOV.UK: Self Assessment tax returns – deadlines
• GOV.UK: Pay your Self Assessment tax bill – pay weekly or monthly (Budget Payment Plan)
• GOV.UK: Budget 2026 overview of tax legislation and rates (sections 1.5 and 2.31)

More guides for UK online sellers

• Do You Pay Tax on Vinted? UK Rules & HMRC Limits 2026 – Own clothes vs reselling, the £1,000 allowance and the 30-sale reporting rule, in plain English.
• Vinted HMRC Form & NI Number Request: What to Do – Why Vinted is asking for your National Insurance number, the end-of-year deadline, and why it doesn't mean you owe tax.
• Vinted Tax Calculator UK: Free HMRC Limit Checker – Check your sales against the 30-sale / ~£1,700 reporting rule and the trading allowance, with a 2026/27 or 2027/28 tax-year switch. It checks limits, not your tax bill.
• eBay HMRC Reporting Threshold 2026: £1,707 or 30 Sales – What eBay counts towards £1,707, what it reports, and why a report isn't a tax bill.
• Got an HMRC Letter About Vinted or eBay Sales? What to Do – A calm step-by-step: check it's genuine, work out if you were trading, and reply on time.
• Free Vinted & eBay Profit Tracker Spreadsheet (UK) – A free download with tax-year tabs, profit per item and a check against the HMRC limits.
• Trading Allowance vs Expenses: Which Should Resellers Use? – The £1,000 allowance or your real costs? Why resellers who track stock costs often come out ahead with expenses.
• Do Resellers Need to Register for Self Assessment? – When reselling counts as trading, the £1,000 rule, and the 5 October and 31 January deadlines.
• Depop HMRC Reporting: Do You Pay Tax on Depop Sales? – What Depop reports, what it asks you for, and Depop's own example of being reported but owing no tax.
• Etsy UK Tax: HMRC Reporting Rules for Sellers 2026 – When Etsy reports you to HMRC, and why things you make to sell usually count as trading.
• Trading Allowance Rises to £3,000: What Budget 2026 Changed – The trading allowance is due to rise from £1,000 to £3,000 from 6 April 2027, subject to Finance Bill. When it starts, who it helps, and why £1,000 still applies until then.
• Why Is eBay Asking for My National Insurance Number? – Why eBay wants your NI number, what happens if you don't give it, and why giving it doesn't mean you owe tax.
• Selling Personal Items on eBay: Do You Pay Tax? (UK) – Clear-outs vs trading, the £6,000 Capital Gains Tax rule for valuable items, and why eBay may still report you.
• Facebook Marketplace & HMRC: Do They Report You? – What we could and couldn't confirm about Facebook Marketplace reporting, what Gumtree says, and why the tax rules are the same either way.
• Am I Trading? HMRC's Badges of Trade for Resellers – HMRC's nine badges of trade with Vinted and eBay examples, plus car boot sales: when selling becomes trading.
• Vinted Pro vs Personal Account: Does It Change Tax? – What Vinted says about Pro and standard accounts, what HMRC actually looks at, and why switching account type isn't what decides tax.
• Side Hustle Tax Calculator UK: How Much Tax Will I Pay? – A rough estimate of the extra Income Tax and Class 4 National Insurance on your reselling profit, comparing the trading allowance with your real costs. England, Wales and NI.
• Telling HMRC About Past Online Sales: Disclosure Guide – Realised you should have declared past reselling income? The routes GOV.UK describes, step by step, and how far back it goes.
• MTD for Resellers: Do eBay & Vinted Sellers Need It? – Most sellers won't need Making Tax Digital for Income Tax. The £50,000, £30,000 and £20,000 thresholds, and why they count sales, not profit.
• Whatnot UK Tax: Do Sellers Pay Tax and Does It Tell HMRC? – How Whatnot reports UK sellers to HMRC via Ireland, when live-selling income is taxable, Whatnot's fees as expenses, and the £90,000 VAT line.
• TikTok Shop UK Tax: When Sellers Pay and What HMRC Sees – TikTok Shop's 30 orders or €2,000 reporting rule, where to find your MRDP report, and why being reported isn't the same as owing tax.
• Self Assessment Deadline 2027: A Guide for Vinted Sellers – Your 2025 to 2026 return and tax are due online by 31 January 2027. Which sales it covers, the 30 December tax-code option and how to pay.
• Reseller Expenses UK: Stock, Postage, Fees and Mileage – What resellers can claim on GOV.UK's lists: stock, postage, mileage at flat rates, use of home, and what you can't claim.