Warning: 31 July deadline for paying income tax and NIC

As reported by ICAEW

ICAEW’s Tax Faculty is reminding taxpayers to check if they need to make a second payment on account (POA) for 2024/25 by 31 July 2025, and if so, whether they can make a claim to reduce the amount due.

The normal due date for paying income tax and class 4 national insurance contributions (NIC) under self assessment (SA) for a tax year is 31 January after the end of that year. However, some taxpayers need to make a POA on 31 January during the tax year and on 31 July immediately after the end of the tax year.  

Payments on account 

Each POA is equal to 50% of the total SA income tax and class 4 NIC liability for the previous tax year. If the tax due for the year exceeds the payments on account made, a balancing payment is required on 31 January after the end of the tax year. 

Key dates for tax year 2024/25: 

First payment on account (based on amounts for 2023/24)	31 January 2025
Second payment on account (based on amounts for 2023/24)	31 July 2025
Balancing payment (if required)	31 January 2026

Not all taxpayers are required to make a POA. If the person has submitted a tax return for 2023/24, their online account or self assessment statement should show whether a POA is required on or before 31 July 2025, and if so, how much. The criteria for having to make a POA is explained in HMRC’s guidance.   

Making a claim to reduce a POA 

Before making the 31 July 2025 POA, the taxpayer, or their agent, should consider if a claim can be made to reduce the amount due. This may be possible where the person expects that their total SA income tax and class 4 NIC liability for 2024/25 will be less than that for 2023/24 (for example, because taxable income is lower). A claim can be made online or by post. 

Example 

Abigail is self-employed. For 2023/24, she paid a total of £6,504 in income tax and class 4 NIC. Abigail paid her first POA of £3,252 (50% of £6,504) on 31 January 2025.  

Now that 2024/25 has come to an end, Abigail can see that her profits for the year will be lower than those for 2023/24.

She estimates that her income tax and class 4 NIC liability for 2024/25 will be £5,052 and makes a claim to reduce each POA to £2,526 (50% of £5,052).  

Abigail has overpaid her first POA by £726 (£3,252 - £2,526) and this is offset against her second POA. On 31 July 2025, she pays £1,800 (£2,526 - £726) against her second POA. This is £1,452 less than she would have paid had she not made a claim to reduce her POA.  

It should also be noted that, if the tax return is submitted in time for HMRC to process it before 31 July, HMRC will automatically update each POA before the 31 July payment falls due.  

Interest and penalties 

HMRC will charge interest from the due date on any tax paid late. This includes where a claim to reduce the POA is later found to be excessive, in which case interest is payable on the amount underpaid. The rate of interest currently applying is 8.25%. HMRC will repay any tax overpaid plus interest (the current rate is 3.25%).  

HMRC may charge a penalty where a taxpayer fraudulently or negligently makes an incorrect statement in a claim to reduce a POA. The maximum penalty is equal to the difference between the payment that should have been made and the amount that was paid. 

Fiscal drag 

The decision not to increase personal tax thresholds and allowances in line with inflation is likely to have increased the number of taxpayers who are required to make POAs and the amount of tax that is payable. In September 2024, the Office of National Statistics reported that SA tax receipts for July and August 2024 combined were £14.4bn, an increase of £1.1bn on the same two months in 2023.