Missed The 31 July Payment On Account Deadline? Here Is What To Do Next
The second payment on account deadline for self assessment falls on 31 July each year, and it is a date that catches a lot of people out, particularly if the first payment back in January already felt like a stretch. If it has come and gone and you have not yet paid, the most important thing now is understanding exactly what happens next and how to deal with it properly, rather than putting off dealing with it any further.
At TS Newton, we speak to sole traders and landlords across Teesside every year who find themselves in exactly this position. Here is what a missed payment on account actually means and what to do about it.
What A Payment On Account Actually Is
Payments on account are advance payments towards your next tax bill, based on what you owed the previous year. HMRC splits this into two instalments, one due by 31 January alongside your tax bill for the previous year, and a second by 31 July. The idea is to spread your tax liability across the year rather than facing one large bill in January.
For many sole traders and landlords, particularly those whose income fluctuates, this system can feel disconnected from actual cash flow, which is often exactly why a July payment gets missed even when someone fully intends to pay it.
What Happens If You Miss The Deadline
HMRC begins charging interest on the overdue amount from the day after the deadline, calculated daily until the payment is made. This is different from a late filing penalty, since payments on account are not tied to a tax return submission, the interest simply starts accruing as soon as the payment is late.
The longer a payment on account goes unpaid, the more interest builds up, so the most useful thing you can do is address it as soon as possible rather than waiting until your next return is due, by which point it can have become part of a larger, more complicated balance.
What To Do If You Cannot Pay In Full
If the payment is overdue because the amount is genuinely difficult to find in one go, HMRC does allow Time to Pay arrangements, letting you spread the outstanding amount over an agreed period. This does not remove the interest already accruing, but it does prevent the situation from escalating further and gives you a clear, manageable plan rather than an open ended debt.
Reaching out proactively, rather than waiting for HMRC to chase the payment, generally leads to a more straightforward conversation and a more workable arrangement.
Can You Reduce A Payment On Account If Your Income Has Dropped
If your income for the current tax year is genuinely lower than the year the payment on account was based on, it is possible to apply to reduce the payment. This is worth looking into carefully though, since reducing it too far, if your income later turns out higher than expected, can result in interest being charged on the shortfall. Getting this calculation right from the outset avoids creating a second problem while trying to solve the first.
Bringing It Together
A missed payment on account is a genuinely common situation, not a sign that something has gone seriously wrong, but it is one that gets more costly the longer it is left. Understanding what interest is accruing, whether a Time to Pay arrangement makes sense, and whether your payments on account should actually be reduced, are the practical next steps rather than simply hoping the issue resolves itself.
Frequently Asked Questions
What happens if I miss the 31 July payment on account deadline?
HMRC starts charging daily interest on the overdue amount from the day after the deadline. There is no late filing penalty involved specifically for a missed payment on account, but the interest continues to build until the payment is made.
Can I set up a payment plan if I cannot afford to pay in full?
Yes, HMRC offers Time to Pay arrangements that let you spread the outstanding balance over an agreed period. Interest already accrued still applies, but it stops the situation from building into a larger, unmanaged debt.
Can I reduce my payments on account if I am expecting to earn less this year?
Yes, if your income for the current tax year is genuinely lower than the year the payment was based on, you can apply to reduce it. This needs to be calculated carefully, since reducing it too far can lead to interest being charged later if your actual income turns out higher.
Should I speak to an accountant if I have missed the deadline?
It is generally worth it, particularly if you are unsure how much interest is accruing, whether a Time to Pay arrangement suits your situation, or whether your payments on account should be reduced. Getting this right avoids a smaller issue turning into a more complicated one.
Get Help With Your Payment On Account
If you have missed the 31 July payment on account deadline, or you simply want to understand your self assessment position more clearly, TS Newton supports sole traders and landlords across Teesside, Darlington, Stockton on Tees and the surrounding area. Get in touch to talk through your options and get back on track.