July 31 Self Assessment
Payment on Account Guide
Essential advice for self-employed sole traders, business partners, and property landlords across Chester and North Wales approaching HMRC's second annual tax instalment deadline.
As the 31 July Self Assessment payment on account deadline approaches, self-employed sole traders, partners, and landlords across Chester and North Wales are due to make their second tax instalment of the year to HMRC.
However, many self-employed individuals and property owners end up overpaying HMRC on 31 July because their advance payments were calculated automatically based on last year’s higher profits.
If your earnings dropped, you lost a major client, or your property expenses increased over the past tax year, you could be paying HMRC far more upfront than you actually owe.
❓ What is the July 31 Payment on Account?
If your Self Assessment tax bill for the previous tax year was more than £1,000 (and less than 80% was collected at source, e.g. via PAYE), HMRC automatically enters you into the Payment on Account system.
HMRC splits your estimated tax bill for the current year into two equal advance payments:
- First Payment: Due on 31 January
- Second Payment: Due on 31 July
While this spreads your tax bill across the year, HMRC’s system assumes your income remains identical year after year. If your profit drops, the system will still ask for the higher amount unless you actively intervene.
📉 How Sole Traders & Landlords Can Safely Reduce Their July Payment
If you know your taxable profit for the 2025/26 tax year will be lower than the previous year, you have the legal right to submit a request to HMRC to reduce your 31 July payment.
This can be done via three main routes:
- HMRC Online: Through your personal HMRC Personal Tax Account.
- Paper Form: By submitting a formal Form SA303 to HMRC.
- Direct Representation: Directly through your commercial tax software or appointed accountant.
If you reduce your payment on account too much and your actual final tax bill turns out to be higher than estimated, HMRC will charge daily interest on the shortfall from 1 August until paid.
Before cutting your payment, it is essential to review your year-to-date bookkeeping in Xero or QuickBooks to ensure your reduced estimate is mathematically accurate.
🚨 What Happens If You Miss the 31 July Deadline?
If you owe a payment on account and do not pay or reduce it by 31 July:
- Daily Interest: HMRC charges daily interest on the unpaid amount starting immediately from 1 August.
- Enforcement Action: Continued non-payment can lead to formal collection action and late payment penalties.
- Time to Pay Support: If you are facing cash flow difficulties, HMRC offers Time to Pay arrangements, but these should always be established before enforcement action begins.
🛡️ How Phillips & Co Accountants Can Help
As leading Accountants in Chester specializing in Self Assessment and cloud accounting, Phillips & Co helps sole traders and landlords keep complete control over their tax liabilities and HMRC compliance.
Our dedicated tax team can help you:
- Review your actual income and expenses in Xero or QuickBooks to calculate a safe, accurate reduction.
- Submit the official reduction request directly to HMRC on your behalf.
- Ensure you are fully prepared for the upcoming Making Tax Digital (MTD) for ITSA regulatory changes.
Need Help Reviewing Your July Tax Liability?
Don't overpay HMRC or risk interest penalties. Contact our Chester team today for straightforward, fixed-fee accountancy advice.
Disclaimer: The information contained in this article is for general guidance only and does not constitute bespoke tax or financial advice. Tax rules (and HMRC's interpretation of them) are subject to change. Always consult with a qualified accountant regarding your specific circumstances before taking action.