Reminder: HMRC Interest Now Accruing on 2nd Payment on Account (Due 31st July)

As we move into August, a quick but important reminder for anyone making Income Tax payments on account for the 2024/25 tax year: if you have a Second Payment on Account to make, due 31st July 2025, interest is now accruing on the unpaid balance.

What are payments on account?

Payments on account are advance payments towards your income tax bill, typically made in two instalments:

1st payment – due 31 January

2nd payment – due 31 July

Each payment is typically 50% of your previous year’s tax bill (excluding student loans or capital gains tax).

The 2024/25 payments are calculated based on your 2023/24 tax liability and are required by HMRC in most situations where your tax bill exceeded £1,000 in the previous tax year.

Interest charges from HMRC

If your 31st July payment is late, HMRC begin charging interest from 1st August 2025 at their current late payment interest rate. Their rate is currently 8.25% and interest can add up quickly, especially for larger tax bills.

What do I need to do?

Information as to whether you have outstanding Income Tax to pay will be in your Personal Tax Account or Self Assessment statement.   Failing that, we can check this for you.

This is just an estimate of my 2024/25 tax bill.  Do I still need to pay it?

Please contact us if you are unsure whether a payment is due, or if your circumstances have changed and you think your payment on account should be reduced.  If your tax liability for 2024/25 is likely to be significantly less than that of the previous year then there may be some scope to ask for the payment to be reduced.  However, as this became overdue on 1^st August, you need to act quickly.

If you have a payment due, we recommend settling this immediately if you have not already done so, to stop interest accruing.

I am struggling to pay.  What should I do?

If you are struggling with your finances right now and cannot pay on time, it is better to act early, rather than to bury your head in the sand. HMRC may allow you to set up a Time to Pay arrangement. You can set up a Self Assessment payment plan online if you are otherwise up to date with your tax affairs, owe £30,000 or less and are within 60 days of the payment deadline.  If you cannot use the online service, you can contact HMRC by telephone.

Information on how to set up a Time to Pay Arrangement can be found here.

Need support or advice?

If you are unsure what you owe, whether your Payments on Account are correct, or would like us to review your tax position, please do not hesitate to contact us. We are here to help.