Subscribe to our mailing list
Keep up-to-date with the latest news.
As a UK sole trader, understanding your tax deadlines is crucial — and one of the most important mid-year milestones is the second payment on account due on 31 July 2025. In this article, we break down what it means, how to prepare, and how to manage your cash flow effectively.
The second payment on account is an advance payment towards your next Self Assessment tax bill. If your previous tax bill exceeded £1,000, HMRC likely required you to make two payments in the following year — one in January and the second by 31 July.
These are based on your previous year’s tax liability and help HMRC collect tax more evenly throughout the year.
Understanding how your tax payment on account is calculated can help avoid surprises. Each instalment is typically 50% of your previous year’s total tax bill (excluding student loans and capital gains tax).
Tax bill for 2023/24: £4,000
First payment (31 Jan 2025): £2,000
Second payment (31 July 2025): £2,000
Final balancing payment: Due 31 Jan 2026 (based on actual 2024/25 tax liability)
If you earned more or less this year, the balancing payment will correct any overpayment or underpayment.
The July payment on account lands at a time when many small businesses face reduced income or summer-related slowdowns. That makes cash flow management for sole traders essential.
✅ Forecast income and expenses for June–August
✅ Set aside funds weekly or monthly
✅ Use cloud accounting software like Xero or FreeAgent for real-time visibility
✅ Review your bank balance and upcoming costs regularly
Planning now will help you avoid a last-minute scramble or unexpected overdraft fees.
If you expect your 2024/25 income to be significantly lower than last year’s, you may be able to apply to reduce your HMRC payments on account.
You can do this by:
Submitting form SA303 to HMRC
Logging into your Self Assessment account and updating your estimate
⚠️ Important: If you reduce your payments too much and end up owing more, HMRC will charge you interest on the shortfall. Always speak to your accountant before making changes.
Here’s a quick checklist to stay on track with your July tax payment:
Confirm your second payment on account due 31 July 2025
Recalculate expected earnings for 2024/25
Set aside the correct amount
Speak to your accountant if your income has dropped
Use accounting software to monitor profit in real time
At CloudAccountant.co.uk, we help sole traders stay tax-compliant and financially healthy. With cloud tools like Xero and FreeAgent, and a team of experts trained in both accounting and customer service, we make it simple to track income, forecast cash flow, and stay on top of HMRC deadlines.
Best of all? We offer unlimited online support, so you’ll always have someone to ask when things get complex.