How to Pay Quarterly Tax Under Self Assessment

A strong January can make a self-employed business feel as though it is being taxed twice. In many cases, that is because your Self Assessment bill includes tax due for the year just ended and an advance payment towards the next one. Understanding how to pay quarterly tax starts with one key point: for most sole traders, landlords and partners, HMRC does not actually collect income tax every quarter.

Instead, it uses a system called payments on account. These are usually two advance instalments towards your next Self Assessment tax bill. Once you know what they cover, when they are due and how to budget for them, they become far easier to manage.

What people mean by quarterly tax payments

The phrase ‘quarterly tax’ is often used for several different UK tax obligations. Your position depends on how your income is structured.

For a sole trader, freelancer, landlord or business partner completing Self Assessment, it will commonly mean payments on account. You normally make two payments, not four: one by 31 January and another by 31 July.

If your business is VAT registered and submits quarterly VAT returns, you may also have VAT to pay every three months. That is separate from your personal Self Assessment tax. Limited companies pay Corporation Tax under different rules too, while some large companies make quarterly instalment payments.

This distinction matters. A content creator receiving income from platforms, a locum working through Self Assessment and a landlord with rental profits may all face payments on account personally. A limited company director may need to plan for personal tax on salary, dividends or other income alongside the company’s VAT and Corporation Tax obligations.

How to pay quarterly tax through payments on account

Payments on account apply when your previous Self Assessment tax bill was more than £1,000 and less than 80% of that tax was collected at source. Tax collected through PAYE, for example, can reduce or remove the need for payments on account.

Each payment is usually half of your previous year’s Income Tax and Class 4 National Insurance bill. Capital Gains Tax and student loan repayments are not included in this calculation.

Here is how the timetable works:

• By 31 January, you pay any balancing payment due for the previous tax year, plus your first payment on account for the current tax year.

• By 31 July, you pay your second payment on account.

• By the following 31 January, you submit your tax return, pay any remaining balance and make the first payment on account towards the next tax year if one is due.

For example, if your previous relevant tax bill was £6,000, HMRC will usually ask for two payments on account of £3,000 each. If your actual tax bill for the following year turns out to be £7,200, you will have already paid £6,000. The remaining £1,200 is your balancing payment, due the following 31 January.

The challenge is that the next cycle begins at the same time. That January bill could also include the first £3,600 payment on account for the year ahead, based on the £7,200 liability. This is why cash planning matters as much as submitting the return correctly.

Paying HMRC

You can make a Self Assessment payment through your HMRC online account, normally by bank transfer, Direct Debit or debit card. Use the payment reference shown in your account carefully. For Self Assessment, this is generally your 10-digit Unique Taxpayer Reference followed by the letter K.

Do not leave payment until the final afternoon if you are using a method that takes time to clear. A payment must reach HMRC by the deadline, and late payment interest can apply from the day after it is due. Direct Debit can be useful for regular planning, but it needs to be set up early enough for the first collection.

Work out what to set aside before the deadline approaches

Relying on the balance in your bank account is risky, particularly when income varies by month. This is common for contractors between projects, e-commerce businesses with seasonal sales, and creators whose brand work or platform income can fluctuate sharply.

A practical starting point is to move a percentage of each payment received into a separate tax savings account. The right percentage depends on your profit level, other income, pension contributions and allowable expenses, but many self-employed people start with 25% to 30% and review it with their accountant.

The percentage should be calculated on profit, not turnover. If an online retailer takes £10,000 in sales but spends £4,000 on stock, fulfilment and advertising, the taxable position is not based on the full £10,000. Equally, setting money aside only after paying suppliers and personal drawings can leave a shortfall.

Keep bookkeeping current. Up-to-date records let you see your likely taxable profit before January arrives, rather than discovering it after a year of receipts, invoices and bank transactions has built up. They also make it easier to identify legitimate business costs, such as professional software, equipment, use of home costs or travel that is wholly and exclusively for the business.

Can you reduce payments on account?

Yes. You can ask HMRC to reduce them if you reasonably expect your tax bill to be lower than the previous year. This may be appropriate if your trading profits have fallen, you have stopped letting a property, or more of your income is now taxed through PAYE.

For instance, a contractor who had an exceptional year because of a one-off project should not automatically assume the same profits will continue. Reducing an unrealistic payment can protect working capital and prevent you from overpaying tax months before it is due.

However, this is not a way to postpone a bill you expect to owe. If you reduce payments too far, HMRC can charge interest on the underpaid amount from the original due dates. The better approach is to base the request on current management figures, expected income and known expenses - not optimism.

If you are uncertain, a forecast is more useful than a guess. It should account for income already received, confirmed work, recurring expenses, tax deducted at source and any major changes expected before the end of the tax year.

Avoid the mistakes that create unnecessary pressure

The most common problem is confusing revenue with profit. Another is overlooking the first payment on account when budgeting for a January balancing payment. Both can make an otherwise manageable bill feel unexpected.

It is also easy to treat VAT money as available cash. VAT collected from customers is generally not your income, and it should be ring-fenced alongside money for Income Tax, National Insurance and Corporation Tax where relevant. Businesses with regular VAT quarters need a cash plan that reflects both VAT deadlines and Self Assessment dates.

Finally, do not assume your business structure determines everything. A limited company does not itself make Self Assessment payments on account for Corporation Tax in the same way, but you may still have a personal Self Assessment obligation because of dividends, rental income or untaxed income outside the company.

When professional support adds value

Tax payment dates are straightforward on paper. The difficult part is interpreting them against a real business with irregular income, mixed revenue streams and changing costs. This is especially true for creators combining affiliate income, sponsorships and digital product sales, or healthcare professionals balancing PAYE work with private practice income.

An accountant can help you forecast the next tax bill, check whether payments on account are appropriate, claim the expenses you are entitled to and keep records ready for submission. At AccountingIN, that support is designed to give business owners clearer financial visibility, not simply a return filed at the last minute.

The most useful habit is simple: treat tax as a regular business cost from the moment income arrives. With current records and money set aside steadily, the January and July deadlines become planned payments rather than unwelcome interruptions.