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How to Reduce Your Payments on Account

If you’re expecting a drop in income for the 2025/26 tax year, you may be able to reduce your Self Assessment payments on account. Here’s how it works and what you need to know.

1. Timing is Key

You’ll have a much clearer picture of your annual income by January 2026, so that’s the best time to consider reducing your payments on account (which are normally due 31 January and 31 July).

Avoid guessing too early in the tax year—HMRC expects your estimate to be reasonable and based on actual performance to date.

Just as an aside, if you think your income will increase in the tax year, there is no need to increase your payment on account. If you do your tax return in the following year before the middle of July and it shows an increase in income, HMRC will not demand more in the July payment, so no fear of it going up.

2. What Qualifies as a Valid Reason to Reduce the Payment?

  •  Fewer contracts or gigs this year
  •  Time off due to illness, family, travel, or even study
  • A change in working pattern (e.g. fewer teaching days)
  • You’ve ceased self-employment during the year for any reason eg working now as PAYE, forming a limited company for your work, or even retirement. You should tell HMRC you have stopped self-employment (https://www.gov.uk/stop-being-self-employed) even though they will tell you that you still need to do a tax return for that year.

3. How to Make the Change

You will need to calculate what you expect to be your taxable income from all sources, then calculate the amount of income tax and class 4 national insurance for the year, and then divide that by 2 (for January and July payment dates). If there is a significant difference, then
the change could be done.

You can apply to reduce your payments through:

  • Your HMRC online account (Government Gateway)
  • Your tax agent can amend the tax return filed and do the reduction on the face of the tax return (which is quicker), but may not have the time to do so in December and January.
  • A paper form SA303 (if you prefer)

Steps via Government Gateway:

1. Log into your online tax account
2. Select Self Assessment
3. Choose “Reduce payments on account”
4. Enter your estimated total tax due for the 2025/26 tax year (not just your income!)
5. Submit your request

HMRC will automatically reduce both January and July instalments to match your new estimate. I have seen it take a couple of weeks for this to go through, so don’t try and do it at the end of January.

4. What If You Get It Wrong?

If you reduce the payment too far and your actual tax bill is higher, HMRC will charge interest on the shortfall. So it's important to be honest and realistic with your figures. If you’re unsure, I’m always happy to review your estimates before you submit the request but sadly, we will need to charge for this review, and definitely charge if we change the tax return as it does take time to do and get you to sign off on the new return. If you do it
yourself, please let us know so we can adjust our records, and know the starting point for the following years tax return.

5. Still Need Help?

Just let me know if you’d like:

  • Help calculating your expected tax bill
  • A second pair of eyes on your estimate
  • Guidance using the Government Gateway portal
  • We’re here to make tax season as smooth as possible.

Performance Accountancy – Tax guidance that speaks your language (and your instrument!) – www.performanceaccountancy.co.uk