Should a client reduce their payments on account? SA303, the 31 January deadline and the interest if the guess is wrong

A client who expects a smaller tax bill this year can ask HMRC to cut their payments on account, online or on form SA303. The claim is easy to make. The cost of guessing too low is interest on the shortfall, charged from the dates the payments were due, and it is worth putting a number on that before the client asks.

Who pays on account in the first place

GOV.UK says a client must make two payments on account, due by midnight on 31 January and 31 July, unless either:

• the tax they owed last year was less than £1,000; or
• last year they paid more than 80% of the tax they owed outside Self Assessment, for example through PAYE.

Each payment is half of last year's bill, after tax taken at source. That rule comes from section 59A of the Taxes Management Act 1970. GOV.UK says the balancing payment, due the following 31 January, also includes any capital gains tax and, for the self-employed, student loan repayments, so those are not part of the two instalments.

For 2026 to 2027, the first payment on account is due on 31 January 2027, the second on 31 July 2027, and the balancing payment on 31 January 2028.

When a client can reduce them

GOV.UK lists three reasons to claim:

1. business profits or other income go down;
2. the tax relief they are entitled to goes up;
3. tax deducted at source is more than in the previous year.

The claim must be made by 31 January after the end of the tax year, so for 2026 to 2027 the last day is 31 January 2028. HMRC's manual (SAM1001) says a claim always applies to both payments, with the reduction split equally between them. If the client has already paid more than the reduced figure, the overpayment stays on their record unless they ask for it back.

There are two ways to claim. Online, the client or agent signs in, selects the latest return and chooses "Reduce payments on account", giving the expected income. On paper, form SA303 is filled in on screen, printed and posted to HMRC, with the UTR and the HMRC office address from the client's statement.

The interest if the reduction goes too far

GOV.UK says that if payments on account are reduced and the tax bill turns out higher, interest is charged on the difference. Section 86 limits the interest: each payment is treated as if it should have been the lower of what it would have been without the claim and half of the final bill. A client is not charged interest for failing to pay more than the original figure.

The late payment interest rate was 7.75% on HMRC's rates page read on 5 October 2026. It is base rate plus 4% and moves when base rate does, so check it again before giving a client a figure.

One client, three outcomes

The client is a sole trader whose 2025 to 2026 bill was £12,000, all paid through Self Assessment. Both payments on account for 2026 to 2027 are therefore £6,000. Work has dropped, and in January 2027 the client asks to cut each payment to £3,000. We have assumed the rate stays at 7.75% and the balance is paid on 31 January 2028.

The counting: £1,500 at 7.75% for a full year is £116.25. From 31 July 2027 to 31 January 2028 is 184 days, so the second payment's interest is £116.25 multiplied by 184 over 365. In the third row the final bill is higher than last year, but the cap stops at the original £6,000 per payment, not £6,500.

Had the client cut each payment to £4,500 and the bill come in at £9,000, there would have been no interest at all. Reducing by a figure the practice can support from the management accounts costs nothing; reducing to a hopeful figure costs the late payment rate on the gap.

What the practice does

1. Get numbers first. Use year-to-date figures, or a forecast the client signs off, before making a claim. A claim with no workings behind it is the one that comes back with interest.
2. Keep a margin. If the forecast says £9,000, a claim to £4,500 a payment is defensible; £3,000 is a bet.
3. Note it on the file. HMRC's manual says penalties may be charged for fraudulent or negligent claims. A dated note of the figures used is the practice's record of care.
4. Revisit before 31 July. A claim can be changed. If trading picks up, increasing the second payment cuts the interest.
5. Diary the balancing payment. The reduced instalments mean a bigger bill on 31 January 2028, plus the first payment for the next year.

The penalties for paying late are in our Self Assessment penalty calculator, and our penalty question guide separates interest from penalties. Clients who are joining Making Tax Digital will have quarterly figures to base the claim on; our MTD quarterly guide covers what those updates hold.

Overlyft can set up an AI assistant to draft the workings for a reduction from a client's year-to-date figures and diary the 31 July check. The claim and the figure stay with the accountant.

This is general information, not professional advice.