If you expect your Self Assessment tax for the current year to be lower than last year, you can claim to reduce your payments on account online or on form SA303, as long as you claim before 31 January after the end of the tax year. You must state the figure you expect and why. If your estimate proves too low, HMRC charges interest on the shortfall from the original due dates, and a penalty is possible only where the claim was made fraudulently or negligently.

When can you reduce your payments on account?

Payments on account are each half of the previous year’s “relevant amount”, which is broadly your Income Tax and Class 4 National Insurance less tax deducted at source (section 59A of the Taxes Management Act 1970). Because they look backwards, they can be too high when your circumstances change. HMRC’s guidance on form SA303 says you can apply to reduce them if:

  • your business profits or other income go down;
  • the tax relief you are entitled to goes up; or
  • tax deducted at source is more than in the previous tax year.

Section 59A(3) also lets you cancel both payments entirely if you believe you will have no Self Assessment liability, or that it will be covered by tax deducted at source. Section 59A(4) covers a partial reduction to a stated amount. Our main guide to payments on account explains who has to make them in the first place.

What is the deadline for a claim?

A claim must be made before 31 January following the end of the tax year (section 59A(3) and (4)). HMRC’s SA303 guidance gives the example of claiming by 31 January 2025 for the 2023 to 2024 year. On the same basis, payments on account for 2026 to 2027 can be reduced until 31 January 2028.

The useful time to claim is earlier. If you claim before 31 January 2027, the first instalment for 2026 to 2027 is reduced before you pay it. If you claim after paying, HMRC’s legal framework manual (SALF303) says any overpayment is refunded with repayment interest. Claiming does not move the due dates (SAM1030).

How do you apply online or by post?

There are three ways to claim.

  1. Online. Sign in to your HMRC online account, view your latest Self Assessment return and choose “Reduce payments on account”, as GOV.UK’s guide to understanding your bill describes.
  2. Form SA303. Fill in the form on screen, print it and post it to HMRC. You cannot save your progress, and you need your Unique Taxpayer Reference or employer reference and the name and address of your HMRC office, shown at the top of your statement.
  3. In your tax return. SALF303 confirms a claim can be made in a return, on a claim form or by letter. SAM1030 says claims made in a return are dealt with automatically when the return is processed.

Whichever route you use, the claim must state your belief about the year’s liability and your grounds for it. SALF303 says a claim without these details has not been properly made, but HMRC has no power to reject a claim that is properly made. You can also send a revised claim if your forecast changes, and HMRC treats it in the same way as the first (SAM1030).

How do you work out the reduced figure?

Start with a realistic estimate of the current year’s Income Tax and Class 4 National Insurance, then deduct tax you expect to be deducted at source, such as PAYE on a salary. Capital Gains Tax and student loan repayments are left out, because they are never part of payments on account and are paid with the balancing payment (SALF303). Each new payment on account is half of the figure you state.

Base the estimate on evidence you could show HMRC later: management accounts, a profit forecast, a contract ending, or a pension or salary that has started to bear PAYE.

What happens if you reduce them too far?

Interest is the main cost. SALF305 explains that where a claim proves excessive once the return is filed, interest is charged on the difference between what you paid and what you should have paid had the claim been made in the correct amount. The amount you should have paid can never exceed 50% of the previous year’s relevant amount, so interest is capped at the level of the original payments on account. Interest runs from the original due dates, at the late payment rate of base rate plus 4%, which HMRC publishes as 7.75% from 9 January 2026. See our guide to HMRC late payment interest.

A shortfall on payments on account does not by itself attract a late payment penalty, as HMRC’s Self Assessment Manual (SAM61250) confirms. But whatever is still unpaid at 31 January becomes part of the balancing payment, which does. Our guide to late payment penalties sets out the trigger dates.

A worked example

Illustration only. Priya’s relevant amount for 2025 to 2026 was £8,000, so her payments on account for 2026 to 2027 are £4,000 on 31 January 2027 and £4,000 on 31 July 2027. A large client leaves, and her forecast shows tax of about £5,000 for 2026 to 2027. In January 2027 she claims to reduce each payment to £2,500 and pays both on time.

Actual 2026 to 2027 liability Correct payments on account Interest charged on
£5,000 £2,500 each Nothing; the claim was right
£5,200 £2,600 each £100 of each instalment from its original due date
£9,000 £4,000 each (capped) £1,500 of each instalment from its original due date

In each case the balancing payment is due on 31 January 2028. In the last case Priya pays £4,000 then, and interest on each £1,500 shortfall runs from its original due date until that payment is made.

Can HMRC charge a penalty for an incorrect claim?

Only in limited cases. Section 59A(6) imposes a penalty where you fraudulently or negligently make an incorrect statement in connection with a claim. The maximum is the difference between what you would have paid with a correct statement and what you actually paid on account. SALF303 says no penalty is sought for innocent error, for example where you acted in good faith and got the sums wrong, or relied on information that was correct when you claimed but later changed.

HMRC’s Enquiry Manual (EM4660) says the penalty is aimed at gross or persistent abuse: blatant claims with no facts to support them, or claims made year after year that leave the taxpayer paying too little, where the reduction is large. Ordinary forecasting errors are dealt with by interest.

What mistakes should you avoid?

  • Cutting payments to zero with no grounds, simply to ease cash flow. A payment plan is the honest route; see our guide to setting up a Self Assessment payment plan.
  • Forgetting Capital Gains Tax. A large gain does not raise payments on account, but it will raise the balancing payment.
  • Not revisiting the claim. If trading recovers, a revised claim or a voluntary payment limits the interest.
  • Overlooking an amendment to last year’s return. Section 59A(4A) resets payments on account to half of the amended figure, subject to any reduction claim, and SALF303 says interest then runs from the original due dates.

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Sources

Reviewed by Christine Anderson, Broker, Solar Protect. Last reviewed 19 October 2026. Part of Accountapedia, the Solar Protect guide to UK tax and accounting. This page is general information, not personalised advice.