Four days. That's roughly how long is left before HMRC expects half of next year's tax bill, calculated on last year's profits, whether or not this year is actually going the same way. If you're self-employed or you have income HMRC doesn't collect through PAYE, the second payment on account for the 2025/26 tax year falls due on 31 July 2026 — and unlike the January deadline, this one tends to catch people off guard. There's no return to file alongside it, no reminder email with a big red banner, just a figure that quietly reappears in your HMRC online account roughly six months after you last thought about it. Plenty of people only notice it's coming when they log in to check something unrelated and find the balance sitting there, already accruing interest in their head before it's even technically due. Freelancers, landlords, and anyone with a second income stream outside PAYE are the ones most likely to be caught out, because the July date has none of January's fanfare — no filing deadline attached, no press coverage, nothing forcing it onto a calendar the way the January rush does. Miss it, and the consequences start immediately rather than building up gradually the way some other tax deadlines do.
Why HMRC Wants Money Before the Year Is Even Finished
Payments on account exist because HMRC would rather collect tax in instalments than wait a full year and hope you've saved enough. You're pulled into the system if your last Self Assessment bill came to more than £1,000, unless at least 80% of the tax you owed was already collected some other way — through PAYE on a second job, for instance. Each payment is set at 50% of your total Self Assessment income tax and Class 4 National Insurance liability for the previous tax year, split into two instalments: one on 31 January, alongside your balancing payment for the year just finished, and one on 31 July, on its own, with nothing else due at the same time.
Say your 2024/25 Self Assessment bill came to £6,000. HMRC assumes 2025/26 will look roughly similar and asks for £3,000 in January and another £3,000 in July — both counted against whatever your actual 2025/26 liability turns out to be once you file that return next January. It's a reasonable system when your income is stable. It's a much rougher one if your best client dropped you in March, your day rate fell, or you simply had a slower year, because HMRC's estimate doesn't know any of that until you tell it.
What Happens the Moment You Miss the Deadline
The number to know is 7.75%.
That's HMRC's current late payment interest rate, in force since 9 January 2026 — the Bank of England base rate of 3.75% plus a fixed 4% surcharge that's been in place since April 2025. Interest starts accruing daily from 1 August, calculated on whatever balance remains outstanding, for as long as it stays unpaid. There's no grace period and no reminder before it begins. Unlike the January balancing payment, though, a late payment on account doesn't trigger an automatic fixed penalty purely for being late — the immediate cost is interest, not a fine. But leave it unpaid for long enough and it stops being an isolated late instalment: once your 2025/26 return is filed and the outstanding amount rolls into your balancing payment calculation, it can get swept into the same penalty schedule that applies there — 5% of the unpaid tax at 30 days, another 5% at six months, another 5% at twelve. It is simple interest, not compound, so HMRC isn't charging interest on interest already accrued — small comfort, but it does at least cap how fast the debt can snowball compared with a revolving balance. Set that 7.75% against what a typical business overdraft or credit card charges and it stops looking like free money either way, even though plenty of people quietly treat a late payment on account as exactly that.
Paying something on 31 July, even a partial amount, is worth more than waiting until you can pay it all. Interest is calculated daily on the outstanding balance, so a £1,500 part-payment against a £3,000 bill roughly halves what accrues from that point forward — a call worth making before the deadline rather than after.
If 2025/26 Genuinely Looks Different, You Can Reduce the Payment
If you can see, with reasonable confidence, that your 2025/26 income tax and Class 4 NIC liability will come in below what HMRC calculated from your 2024/25 figures, you don't have to pay the full amount. You can submit a claim to reduce your payments on account, either through your HMRC online account or on form SA303, giving HMRC your own estimate of what you expect to owe. Freelancers coming off a genuinely quieter year — fewer contracts, a client who went under, a stretch of unpaid parental leave — are exactly who this exists for.
Here's the part people skip: reduce it too far and the shortfall attracts interest once your real liability is worked out at filing time, calculated back from the original due date as though you'd simply underpaid. If HMRC decides the reduction wasn't a reasonable estimate but a deliberate underclaim, a penalty can follow on top of the interest. Don't submit a round-number guess pulled out of thin air — run your year-to-date figures through whatever you already use to track income, whether that's FreeAgent, Xero, QuickBooks, or a spreadsheet you actually trust, and reduce the payment to match what those numbers say, not to what you'd prefer to owe.
The Time to Pay Route, and Why Calling Before 31 July Beats Calling After
If the money genuinely isn't there, HMRC's Time to Pay arrangement lets you spread the payment over monthly instalments instead of finding it all at once. You can set one up yourself online, without speaking to anyone, provided you meet a specific set of conditions:
- Under £30,000 in total
- Your most recent Self Assessment return is already filed and up to date
- Applied for within 60 days of the payment deadline
- No other active payment plan or outstanding debt sitting on the same HMRC account
Owe more than £30,000, or fall outside any of those conditions, and the online tool won't set the plan up for you — you'll need to ring HMRC's Self Assessment payment helpline directly and talk it through with someone. Either way, timing changes the conversation entirely. Ask for a Time to Pay arrangement before 31 July and you're a taxpayer being proactive about cash flow; ask after HMRC has already started chasing the debt, and you're explaining yourself from a weaker position, sometimes with a penalty already sitting on the account. Setting up the plan stops late payment penalties from applying — it does not stop interest, which keeps accruing on the outstanding balance throughout the arrangement regardless.
Where the July Payment Sits Inside Making Tax Digital
If you're one of the self-employed taxpayers who crossed into Making Tax Digital for Income Tax when it became mandatory for qualifying income over £50,000 from 6 April 2026 — with the £30,000 threshold following in April 2027 — it's worth being clear about what MTD does and doesn't change here. Quarterly digital updates replace how you report income through the year; they don't replace, move, or recalculate the 31 January and 31 July payment dates, which still run on the same annual Self Assessment cycle as before. It's a common point of confusion in a year when plenty of people are dealing with a new reporting rhythm on top of the payment dates they already knew, and conflating the two is an easy way to end up either underpaying or filing something twice.
Whatever the outstanding figure looks like on 27 July, doing nothing until 1 August is the one option that guarantees interest starts running on the full amount. A partial payment, a reduction claim backed by real numbers, or a Time to Pay arrangement booked before the deadline all cost less than silence.