Payments on account explained for content creators

Payments on account are HMRC's way of collecting tax closer to when it is earned, rather than waiting a full year after the tax year ends, since self-employed people do not have tax deducted automatically like employees on PAYE.

The system works by assuming your income this year will be broadly similar to last year. Based on that assumption, HMRC asks for two advance instalments — one on 31 January and one on 31 July — each normally 50% of the previous year's total Self Assessment tax bill.

This is why a first-year creator's tax bill often feels disproportionate. On the 31 January deadline you pay: the balance of tax owed for the year just finished, plus the first payment on account for the year ahead — meaning you can be paying for one and a half years of tax in a single instalment.

The following 31 July, a second payment on account falls due, again typically half of the prior year's bill. Only once the following year's return is actually filed does HMRC calculate your true liability and either bill you a "balancing payment" for any shortfall or apply a refund for any overpayment.

Payments on account do not apply to everyone. If your Self Assessment bill for the previous year was under £1,000, or if more than 80% of your tax was already collected at source (for example through PAYE from an employed job), you are excluded from the system.

Growing creators are hit hardest by this mechanism, because payments on account are based on last year's figures — if your income doubles, your actual tax due this year could be far more than the advance payments assumed, leaving a larger balancing payment still to come.

The reverse is also true and useful: if you know your income for the current year will be noticeably lower than last year (for example after a platform algorithm change or reduced brand deal volume), you can apply to HMRC to reduce your payments on account to a more realistic figure.

Reducing your payments on account needs to be done carefully and with a genuine, evidenced reason. If you reduce them too far and your actual tax bill ends up higher, HMRC will charge interest on the underpayment calculated from the original due dates, even though you reduced the payment in good faith.

The most effective way to avoid payments on account becoming a shock is to set money aside consistently throughout the year, treating a portion of every payment received as "not yours" until tax is settled — many creators find a separate savings account for this purpose invaluable.

It is worth remembering that payments on account are not an extra tax or a penalty — they are simply your own future tax bill, paid early. Once your income stabilises year on year, the system becomes far less disruptive because each year's payments on account closely match the actual liability that follows.

If cash flow is genuinely tight when a payment is due, HMRC's Time to Pay service can spread the amount over instalments, though interest continues to accrue on any unpaid balance, so it is best used as a last resort rather than a routine plan.

Source: Income Tax rates and allowances (gov.uk) · Self Assessment (gov.uk)