The 31 July Payment on Account: The Mid-Year HMRC Deadline Non-Resident Directors Never Budget For

If you are a non-resident director who files a UK Self Assessment return, there is a tax deadline sitting in the middle of the summer that has nothing to do with your company's accounts: midnight on 31 July 2026, when the second payment on account for the 2025/26 tax year falls due. It is one of the least understood parts of the UK personal tax system, and it regularly catches out founders who assumed their next payment to HMRC was not due until January.

What Is a Payment on Account?

Payments on account are advance payments towards your next Self Assessment bill. Instead of letting you pay a full year of tax in arrears, HMRC asks you to pay your estimated liability for the current tax year in two instalments: one by 31 January, and one by 31 July. Each instalment is half of your previous year's tax bill (your income tax plus Class 4 National Insurance, but not capital gains tax or student loan repayments).

So the payment due on 31 July 2026 is the second half of your estimated 2025/26 liability, calculated from what you owed for 2024/25. Any difference between the estimate and your actual bill is settled through a balancing payment the following 31 January.

Who Has to Pay — and Who Is Exempt

Not everyone in Self Assessment makes payments on account. Under GOV.UK's rules, you are outside the system if either of the following applied to your last return: your Self Assessment bill was less than £1,000, or more than 80% of the tax you owed was collected at source (for example through PAYE on a salary).

This is exactly why non-resident directors get caught. A director who takes a small salary and larger dividends from a UK LTD typically has most of their tax not collected at source. The first time their Self Assessment bill crosses £1,000, HMRC switches on payments on account automatically — often without the founder noticing the extra lines on their tax calculation.

Why the First Year Feels Like a 150% Tax Bill

The system stings most in the first year it applies. Suppose your 2024/25 bill was £4,000 and it was your first year owing that much. On 31 January 2026 you did not just pay the £4,000 — you also paid the first £2,000 instalment towards 2025/26. That is 150% of your bill in one day. Now, on 31 July 2026, the second £2,000 instalment is due.

Founders who did not budget for this often discover it only when their HMRC online account shows an amount due in July they were not expecting. If you filed your 2024/25 return earlier this year, log in and check now — the figure and due date are shown in your Self Assessment account.

Miss It, and Interest Starts Running — But the Rules Differ From January

Here is a nuance many articles get wrong. The 5% late payment penalties that apply to a late 31 January balancing payment do not apply to payments on account. HMRC's own Self Assessment manuals confirm that late payment penalties attach to balancing payments, not to payments on account.

That does not make July a soft deadline. Late payment interest starts accruing from 1 August 2026 on any unpaid amount and runs daily until you clear it. HMRC's late payment interest rate is set at the Bank of England base rate plus 4% — 7.75% per year as at the time of writing. On a few thousand pounds, that adds up quickly, and it is not tax-deductible.

If you genuinely cannot pay, contact HMRC about a Time to Pay instalment arrangement before the deadline rather than simply missing it.

Can You Reduce the July Payment?

Yes — if your income has genuinely fallen. Payments on account are based on last year's bill, so if your 2025/26 income will be lower (for example, you took fewer dividends, or profits dropped), you can ask HMRC to reduce both instalments. You can do this online through your Self Assessment account or by filing form SA303.

But be careful: this is a self-declared estimate, not a free deferral. If you reduce your payments below what your actual bill turns out to be, HMRC charges interest on the shortfall, calculated as if the correct instalments had been due all along. Reducing payments on account to ease cash flow when income has not actually fallen is a false economy.

What Non-Resident Directors Should Check This Month

Three quick checks are worth doing before the end of July. First, log in to your HMRC online account and see whether a payment on account is showing as due on 31 July 2026 — do not assume you would have received a letter, especially at an overseas address. Second, if you have not yet filed your 2024/25 return, remember that filing early does not accelerate any tax payment deadline, but it does tell you exactly what July's instalment should be. Third, if your income has dropped, run the numbers on a reduction claim before paying, not after.

Paying from abroad is straightforward: HMRC accepts international bank transfers, and your payment reference is your ten-digit Unique Taxpayer Reference followed by the letter K.

Have Questions About Your Own Situation?

Every founder's tax position is different, and payments on account interact with salary, dividends, and residence status in ways that are easy to get wrong. If you would like to talk through how the July deadline applies to you, our experts team is happy to help — no pressure, no hard sell, just clear answers.

Book a free consultation with our experts →