Scope: For Self Assessment taxpayers whose current-year liability is expected to be lower than the figure on which HMRC calculated payments on account.
The short answer
If you know the tax you owe will be lower than last year, you can ask HMRC to reduce your payments on account. The request can be made online or by post using form SA303 and must state the lower amount you expect.
Use a defensible estimate. If the final bill is higher than the reduced amount, HMRC charges interest on the shortfall.
First understand what is being reduced
Payments on account are advance payments towards the next Self Assessment bill. There are normally two, each based on the relevant prior calculation, due on 31 January and 31 July. They are not the same as the balancing payment for the year already ended.
Look at the current statement to identify:
- the tax-year liability already calculated;
- payments on account already made;
- the first and second payments requested for the next calculation; and
- any unrelated interest, penalties or older balance.
A request to reduce payments on account does not automatically remove another amount due.
Reasons an estimate may be lower
HMRC’s SA303 guidance gives examples including lower business profits or other income, higher tax relief, or more tax deducted at source than in the previous year.
Other changes can increase one part of the liability while reducing another. Build a whole-year estimate rather than reducing the payment solely because one month or one contract was lower.
Build a reasonable estimate
Start with income received and expenses incurred to date. Add a supportable forecast for the rest of the tax year. Include every relevant source, expected taxable gains and deductions at source. Apply allowances and reliefs only where the conditions are expected to be met.
Record the assumptions and date. Compare the estimated total liability with amounts already paid or deducted and calculate the revised payments on account. Do not simply enter the cash amount you would prefer to pay.
Revisit the estimate when new work begins, a property is let, investment income changes or a gain arises. You can pay more before the final deadline if the position increases.
Apply online or by post
For the online route:
- Sign in to the Self Assessment account.
- View the latest return.
- Choose “Reduce payments on account”.
- Enter the requested estimate and explanation.
- Save the confirmation and check the revised statement.
For the postal route, complete form SA303 and send it to the HMRC office shown in the relevant statement. The form requires the appropriate reference information. Keep a copy and allow for processing time.
HMRC’s form guidance states that the claim must be made by 31 January after the end of the tax year concerned. Do not use that final limit as a reason to leave an unaffordable current payment unexplained.
The interest risk
Reducing a payment is not HMRC agreeing the final tax liability. The return determines the eventual position. If the final liability shows the payments should have been higher, interest is charged on the difference from the relevant due date.
That makes a cautious, updated forecast valuable. Deliberately reducing without a reasonable basis can create an avoidable interest bill and a concentrated balancing payment.
Common mistakes
- Reducing the balancing payment instead of payments on account.
- Forecasting only the business that declined and omitting other income.
- Ignoring payments already made or PAYE deductions.
- Treating last year’s profit reduction as proof this year will remain low.
- Failing to update the estimate when circumstances improve.
- Assuming an online confirmation fixes the final tax bill.
What to do next
- Open the latest statement and identify the exact payments.
- Prepare a whole-year tax estimate with written assumptions.
- Apply through HMRC online or SA303.
- Save the confirmation and check the revised statement.
- Review the estimate during the year.
- File the return promptly and pay any remaining bill.