31 July Payment on Account Deadline: What Accounting Firms UK Need to Check 

The second instalment of the advance payment is due from clients by midnight, 31 July. About 3 million of the estimated 12 million people who complete a Self Assessment each tax year are already making two payments on account, according to HMRC’s own figures. This July deadline isn’t about one calculation; for most practices, it’s about a series of checks being performed on a wide sample of the client base, within a short timeframe, and frequently when staff are on holiday.

The size of the issue should not be forgotten either: according to HMRC data, approximately 20% of Income Tax Self Assessment is paid late, resulting in unnecessary penalties and interest for clients and unnecessary follow-up work for the firm chasing them. If you know what to look for on each client, the typical questions that come from, and where you can see the real risk if it’s left unchecked, then you’re ahead of the July deadline.

This guide includes everything you need to check in your client book before 31 July, the common errors you’ll see and a checklist you can use to visually scan your client book with your team in the final countdown to the deadline. 

What is second payment on account?

A Self Assessment taxpayer pays two advance payments towards their current tax year bill; the second advance payment is the second payment on account. HMRC works it out at 50% of the previous year’s total liability, including Class 4 National Insurance for self-employed clients. It is paid in conjunction with the first payment on account (paid 31 January) and, subsequently, any balancing payment once the year-end return is submitted.

When is the Second Payment on Account due?

The second payment on account date is 31 July each year, and it must be paid to HMRC by midnight on the 31st. For clients, this means the HMRC second payment on account for the current tax year needs to be confirmed, paid, or, if applicable, formally reduced before that date, as interest will begin to accrue from 1 August on any outstanding balance.

What to Check for Each Client Before 31 July

1. Confirm the figure HMRC has calculated

Each client’s second payment is normally half of their previous year’s total liability, including Class 4 National Insurance where they’re self-employed. The figure should be the same on the SA302, in the most recent self-assessment statement, in the online account – if not, it is likely to be a self-assessment statement which has been amended at a later date, a statement which has been submitted after the first was filed, a HMRC adjustment which has not been reflected or a misallocation of an earlier payment. A mismatch should be addressed before payment, not after. 

2. Check whether a payment is actually due

Even if some of your list have already paid, not all of them will be due to pay a second instalment. Clients don’t have to pay if the bill amount was £1,000 or less last year, or if 80% or more of the bill was collected at source last year. This should be verified directly with each of the impacted clients — a £0 balance may lead to a confused call from a client who recalls paying in January and expects a payment again. 

3. Decide whether a reduction is justified — and defensible

What can be done is to reduce what is being paid now, but only at a real cost if the estimate is too low: interest on the deficit at the current rate of 7.75%. Prior to submitting an SA303 on behalf of a client: 

• Use actual year-to-date trading data, not a “general sense” that trading is “down.
• Look for anything else that might be due and could push the final bill even further back, such as dividends, a contract payment that is due late in the current tax year, etc.
• Consider the interest paid for an incorrect reduction as well as the cost of not reducing at all (overpayment period, carried forward or refunded). 

4. Confirm payment method and reference for each client

Faster payments and card payments arrive the same or next day; cheques require additional lead time and have higher risk close to the deadline! All payments must be made with the correct Unique Taxpayer Reference; otherwise the client’s payment may be delayed, even if it is paid on time, creating a client query when the account doesn’t update. 

5. Flag clients who’d benefit from a Budget Payment Plan

A Budget Payment Plan is an optional structure that allows clients to pay their costs over the year in smaller amounts each week or month if they don’t like the lump-sum structure every January & July. It has no impact on the current payment, but it is important to raise with customers immediately after this date, as the amount of the lump sum is still a discussion point. 

6. Identify clients who need a Time to Pay conversation early

If a client is unable to pay the full amount, then a Time to Pay agreement must be sought, and does not happen automatically. For such clients, this should be addressed before 31st July and after the deadline, there are fewer options available to raise this with HMRC. 

Where the July Workload Actually Comes From

• There’s no need for specialist knowledge that your team doesn’t know. Timing and volume: 31 July is harder to manage than January is because: 
• All clients are at the deadline on the same day, and in a shorter time frame than this one that occurred in January.
• It happens when everyone is on summer leave, which means there are fewer people working when client enquiries are highest.
• Many queries are simply misunderstandings: questions from clients about why July is different to January, questions from clients about why the figure is wrong, even when it is right, but they still have to spend time on it.
• A properly done reduction request will include real time per client: taking figures, comparing to last year, and adjusting for anything yet to come in is not a 5-minute task. 

Across a full client book, this tends to show up as partner or senior time diverted onto routine figure checks, slower turnaround on reduction requests and queries, or errors made under pressure — a missed NI component, an SA303 estimate that didn’t account for a late invoice — that surface later as client complaints or unexpected interest charges.

Common Mistakes Worth Checking For Across Your Client List

• Clients who assume July will be like January, where the exemption conditions may apply, meaning that £0 may be payable.
• Estimates for reductions made on a general basis as a result of “lower income” and not on actual figures and known income.
• Class 4 NI, which is omitted from the client’s own estimate, is less than what HMRC has calculated.
• Errors or omissions in UTRs for payments, resulting in follow-up enquiries for payments which are allocated with a delay.
• The client was left to make a bank transfer or cheque payment on the last day, which is when the payment method could fail to clear. 

Last-Minute Checklist for the Run-Up to 31 July

A process to work through with any client remaining from last year:

• Pull the figure — latest statement and the online account all agree.
• Review exemption status — identify any client that may not owe a payment altogether.
• Evaluate for reduction — only if there is proof of an actual reduction of income, and only on actual figures.
• Assess reduction eligibility — if it doesn’t then push clients who are paying on cheques or slow transfers to change method, now.
• Confirm payment method will clear in time — Sort out HMRC mismatch (misallocated payments or unreflected adjustments — before the client rather than after)
• Log Time to Pay candidates—and those who cannot pay in full should have started that conversation as early as now, not on 31 July—should begin the conversation as soon as the opportunity arises.
• Note anything that slowed the process this year — it can begin earlier this year; client communication can begin earlier in June. 

How Aone Outsourcing Solutions Can Help

That’s the sort of workload they can count on for a period of time, but it’s a heavy volume of it for the short term; it’s where companies tend to turn to outsourcing instead of hiring more staff.

1. Figure verification at scale. We reconcile SA302s, statements and online account figures for your clients before they even get to your desk, identifying discrepancies as they happen.
2. Carefully calculated SA303 reduction estimates. Estimated using real client financials and reviewed with the known expected cash inflows, so the estimate is accurate when the final financial return is filed.
3. HMRC liaison. Misallocated payments, unclear adjustments, or Time to Pay requests – processed according to your firm’s directions.
4. Handling of inquiries by the first-line client. No more the “why does this look different from January” conversations so your senior staff are not getting the same question throughout this busiest week.
5. Overflow capacity, on demand. Putting on scale for the two- to three-week crunch time period without any additional staff members who don’t need the rest of the year.

What is changing is that work is delivered under your firm’s name, to your standards, with your team having the final say as to whether it has been delivered correctly, all of which, again, is from the client’s perspective, except for the turnaround. 

Frequently Asked Questions

Q1: Do we need to check exemption status for every client, or only those who paid in January? 

All clients who have been on payments on account for the last year are covered, as the exemption is based on last year’s numbers: a client who paid in January this year could still be exempt from pay on account in July as 80%+ of his/her tax was collected through PAYE this year, or his/her bill has reduced to £1,000 or less. 

Q2: What’s the actual risk if a reduction estimate turns out too low? 

If the shortfall is made from 1 August, interest is charged at the Bank of England base rate plus 4% (currently 7.75% per annum), and this should be taken into account in any estimation exercise with a client who may wish to aggressively reduce. 

Q3: Can a reduction request be corrected later in the year if new information comes in?

Yes — If a client’s SA303 position is reduced, it can be changed again prior to the balancing payment being calculated, but it does not matter if it is reduced once it is submitted; it will not mean that less interest has accrued on an earlier underpayment. 

Q4: How much lead time should we build in for a Time to Pay request? 

While there is no specific time-frame announced by HMRC, requesting prior to 31 July will provide greater flexibility than after that point, as a request made after the payment is due will be treated differently and could incur further investigation.

Q5: Is a Budget Payment Plan worth recommending to clients on tight cash flow? 

For those who can’t handle a double yearly payment, it’s most useful, not for someone who is due a payment now, but to help smooth the path of payments in the future — that’s what Time to Pay is for.