Payments on Account: The Tax Bill That Surprises Every New Self-Employed GP
Half your annual tax bill is due in January — seven months before the tax year ends. Here's how Payments on Account work for locum GPs and how to budget for them.
There is one aspect of Self Assessment that catches almost every newly self-employed GP off guard: Payments on Account.
If you have just filed your first tax return and expected to pay only what you owe for the previous year, you may have noticed the bill was roughly 50% larger than anticipated. That extra amount is your first Payment on Account for the following year — due on the same day as your balancing payment for the year just gone.
What Are Payments on Account?
HMRC uses a system of advance payments called Payments on Account. Instead of waiting until you file your return next January to collect all the tax you owe, HMRC asks you to pay half of your estimated liability now, and the other half in July.
The two due dates:
- 31 January — balancing payment for the year just ended + first Payment on Account for the current year
- 31 July — second Payment on Account for the current year
Each Payment on Account is 50% of last year’s Self Assessment bill (income tax plus Class 4 National Insurance). A balancing payment is due the following January if your actual liability turns out to be higher.
A Worked Example
Suppose your 2024/25 Self Assessment liability (income tax + Class 4 NI) is £18,000.
| Date | Payment | Amount |
|---|---|---|
| 31 January 2026 | Balancing payment for 2024/25 | £18,000 |
| 31 January 2026 | First Payment on Account for 2025/26 | £9,000 |
| Total due 31 January | £27,000 | |
| 31 July 2026 | Second Payment on Account for 2025/26 | £9,000 |
If your 2025/26 liability ends up being exactly £18,000, you will have no further payment due in January 2027 (your Payments on Account cover it exactly). If your income rises, there will be a balancing payment.
When Do Payments on Account Apply?
Payments on Account apply when both of the following are true:
- Your Self Assessment liability is £1,000 or more
- Less than 80% of your income tax was collected at source (e.g. through PAYE)
Almost all sole-trader locum GPs meet both conditions by their second year.
The First-Year Shock
In your first year of locuming, you pay only the actual tax owed — there are no Payments on Account yet because HMRC does not know your income in advance. But when you file that first return in January, you are asked to pay:
- The tax you owe for the year just ended, plus
- A full year’s worth of Payments on Account (two × 50%) for the current year
This means your first Self Assessment payment is effectively 1.5× your annual tax bill, due in a single month.
Budget for this from your very first session. Set aside 25–30% of every payment you receive into a dedicated savings account. By January, you should have enough to cover both the year’s tax and the first instalment.
Can I Reduce My Payments on Account?
Yes — if you believe your income in the current year will be lower than last year, you can apply to reduce your Payments on Account using form SA303 (or through your HMRC online account). Be conservative: if you underestimate and your actual liability is higher, HMRC will charge interest on the shortfall from the original due date.
Key Points
- Payments on Account are not a penalty — they are advance payments credited against your final liability
- They are based on last year’s bill, not a forecast of this year’s income
- Interest accrues from the due date on any amount not paid on time (currently 7.25% per annum)
- Your first January payment will likely be the largest single tax payment of your career — plan for it early
How the Calculator Helps
The UK Locum GP Tax Calculator estimates your Payments on Account in the results section once you run the numbers. The figure shown is each instalment (half your estimated liability). Keep in mind this is modelled on 2025/26 rates — your actual bill depends on your filed return.
This article is for general information only. For advice specific to your circumstances, speak with a locum-specialist accountant.