Many individuals and business owners in the UK pay their tax under the Self-Assessment system, which often involves two payments on account due each year – the first in January and the second in July. These advance payments are calculated based on your previous year’s tax bill. But what if your income has fallen and your tax liability for the current year is likely to be lower?

In that case, it may be possible to reduce the July 2025 payment, helping ease cash flow pressures or avoid overpaying tax unnecessarily. Below we explain when and how this can be done.

Understanding payments on account

Payments on account are advance payments towards your next Self-Assessment bill. They are usually required if your last tax bill was over £1,000 and less than 80% of the tax owed was collected through PAYE.

Each payment is typically 50% of your previous year’s tax liability (excluding capital gains and student loan repayments), with one payment due by 31 January and the second by 31 July.

When a reduction may be possible

If your income for the 2024-25 tax year is expected to be lower than the 2023-24 figure used to calculate your current payments on account, you may be eligible to reduce your July 2025 payment.

This situation might apply if:

• You have experienced a fall in profits from self-employment
• You have stopped working or retired during the year
• Your rental or investment income has dropped
• You have increased allowable expenses, pension contributions or losses carried forward

HMRC allows you to apply to reduce your payments on account if you believe your tax bill will be lower. This can help you avoid overpaying now and waiting for a refund after you submit your return.

How to apply for a reduction

You can apply online via your HMRC Self-Assessment account, by post using form SA303, or call and we will apply for you. The form asks for an estimate of the total tax due for the 2024-25 year, which will be used to recalculate your July 2025 instalment.

If your January 2025 payment was also higher than it should have been, HMRC will offset this when you file your tax return, and any overpaid amounts will either be refunded or credited towards your next tax bill.

Caution – do not under-estimate

It is important to be realistic. If you reduce your payments too far and your actual tax bill ends up higher than expected, HMRC will charge late payment interest on the difference from the original due date. You may also face a penalty if they believe the reduction was made carelessly or deliberately.

Keeping good records, projecting income conservatively, and seeking advice if unsure will help avoid any unwelcome surprises later on.

Summary

If your income or profits have fallen in 2024-25, you do not have to blindly pay your full July 2025 Self-Assessment instalment based on a higher previous year’s figure. With reasonable evidence, you can apply for a reduction, improving your cash flow and helping you avoid unnecessary overpayments.

Call to action:
If you think your July payment could be too high based on your current year’s income, speak to us for a quick review. We can help you assess whether a reduction is justified and make the application on your behalf to avoid overpaying.

Is your child starting school this September? Tax-Free Childcare could save you up to £2,000 a year. Check your eligibility now and start planning ahead.

Working families whose children are starting school for the first time September 2025 could save up to £2,000 a year per child on their childcare bills, thanks to the government’s Tax-Free Childcare (TFC) scheme.

Designed to ease the financial burden of childcare, the TFC scheme offers eligible working families valuable support through a wide network of registered childcare providers. This includes childminders, breakfast and after-school clubs, and approved UK play schemes. Families can also build up their TFC account throughout the year, allowing them to save for higher childcare costs during school holidays.

The scheme is available for children up to the age of 11, with eligibility ending on 1 September following the child’s 11th birthday. For children with certain disabilities, the scheme extends eligibility until 1 September after their 16th birthday.

Under the TFC scheme, for every £8 a parent contributes, the government adds £2, effectively topping up childcare savings by 25%. This support is capped at a maximum of £10,000 in contributions per child each year, meaning parents could receive up to £2,000 annually per child, or £4,000 for children with disabilities.

TFC is open to a wide range of working families, including the self-employed and those earning the National Minimum or Living Wage. Parents on paid sick leave, maternity, paternity, or adoption leave (both paid and unpaid) are also eligible. To qualify, each parent must work at least 16 hours per week and meet minimum income thresholds. However, households where either parent earns more than £100,000 a year, or those receiving Universal Credit or employer-provided childcare vouchers, are not eligible for the scheme.

Commenting on the scheme, HMRC’s Director General for Customer Services said:

“Starting school can be an expensive time – there’s a lot to buy and organise. Now that you know where your child will be going to school, it’s a good time to start planning your childcare arrangements. Tax-Free Childcare can help make those costs more manageable. Sign up today on GOV.UK and start saving.”

With school starting in just a few months, now is the perfect time for parents to check their eligibility and take advantage of the savings available through the scheme.

A proposed change to the way Statutory Sick Pay (SSP) is charged is causing growing concern among UK small business owners. Under current rules, employers are only required to pay SSP from the fourth consecutive day of absence due to illness. However, upcoming reforms suggest that SSP will become payable from the very first day an employee is unable to work. While the intention is to provide greater financial support for employees, this change could place a considerable burden on small businesses, especially those already facing tight margins and limited resources.

Why the change matters

At first glance, paying SSP from day one may not seem like a dramatic shift. But for many smaller employers with limited cash flow, the cumulative cost of covering multiple instances of short-term sickness can add up very quickly. If the three-day waiting period is removed, the frequency and volume of SSP payments will likely increase, meaning that small businesses could see a noticeable rise in payroll costs.

This is particularly challenging for firms in sectors where staff absences are more common, such as hospitality, care, and retail. Unlike larger organisations, small firms often do not have the luxury of a deep bench of staff or the budget flexibility to absorb these extra costs without making adjustments elsewhere.

Wider implications for staffing and operations

One of the unintended consequences of this reform could be a reduction in new hiring. Many small businesses are already cautious when expanding their teams. The prospect of taking on new employees becomes even more daunting if each new hire potentially increases the cost of sickness cover. Some employers may respond by limiting staff hours, hiring fewer people, or relying more on self-employed workers to avoid additional employment liabilities.

Others may look at ways to reduce other overheads to compensate, which could have a knock-on effect on investment in training, marketing, or other areas essential for business growth. This may slow down expansion plans or affect service quality if resources are stretched.

Balancing support and sustainability

The goal of the SSP reform is understandable: to provide better support for workers when they fall ill. Few would argue against the principle of helping people avoid financial hardship due to short-term sickness. However, small businesses are often already operating at or near capacity, and further financial pressure without offsetting support could lead to reduced job opportunities or even force some businesses to scale back operations.

There have been calls for a government rebate or subsidy to help smaller employers manage the cost of this transition. Whether such support will be introduced remains to be seen. In the meantime, businesses are being urged to assess the potential impact on their cash flow and operations.

Revisit business plans

For small and medium-sized businesses with a significant workforce, this proposed change to Statutory Sick Pay is a timely reminder to revisit existing business plans and staffing strategies. An increase in SSP costs, even modest at first, could have a noticeable impact on cash flow, payroll budgeting, and overall financial resilience. Employers should assess whether current plans allow for such additional costs and consider updating forecasts accordingly. If your business may be affected, and you would benefit from support in reviewing your financial position or exploring ways to manage the potential cost increase, please get in touch. Planning ahead now could make all the difference later.

HMRC’s CEST tool gets a revamp from 30 April 2025, with clearer questions and updated guidance to help users decide employment status for tax-plus stronger backing from HMRC.

In a Written Ministerial Statement delivered on 28 April, the Exchequer Secretary to the Treasury announced a series of administrative and simplification measures designed to advance the government’s commitment to modernising the tax and customs systems.

Among these measures is an important update to HMRC’s Check Employment Status for Tax (CEST) digital tool, set to take effect from 30 April 2025. The CEST tool plays a key role in helping users determine whether a worker should be treated as employed or self-employed for tax purposes across both the private and public sectors.

The forthcoming changes aim to improve usability and clarity, making it more accessible and efficient for individuals and organisations alike. In conjunction with these technical improvements, HMRC will issue updated guidance to support users in navigating the revised set of questions, ensuring they are better equipped to use the tool correctly and confidently.

The service provides HMRC’s view as to whether IR35 legislation applies to a particular engagement and whether a worker should pay tax through PAYE as well as helping to determine if the off-payroll working in the public sector rules apply to a public sector engagement. HMRC has confirmed that it will stand by the outcome produced by the CEST tool, provided that the information entered is accurate and complete. However, HMRC will not stand by the results of contrived arrangements and designed to get a particular outcome from the service.

The service can be used by a variety of users, including:

• Workers providing services;
• Individuals or organisations engaging workers; and
• Employment agencies placing workers with clients.

Filing your 2024-25 Self-Assessment return early means faster refunds, better budgeting, and no deadline stress. Do not delay, start gathering your tax details today.

The 2024-25 tax year officially ended on 5 April 2025, with the new 2025-26 tax year beginning on 6 April 2026. While many taxpayers may be tempted to put off dealing with their self-assessment tax return until later this year, or early next year, there are several compelling reasons why filing early makes sense.

HMRC recently reported that nearly 300,000 people submitted their 2024-25 self-assessment returns during the first week of the new tax year, almost ten months before the 31 January 2026 filing deadline.

Filing early doesn’t mean paying early. However, by preparing and submitting your tax return well in advance, you gain the advantage of knowing exactly what you’ll owe by the 31 January deadline. This can be incredibly helpful for budgeting and avoiding any last-minute financial surprises.

Submitting your return early gives your accountant more time to work through the details without the pressure of a looming deadline. If you are due a tax refund, the sooner your return is filed and processed, the sooner you’ll receive your money.

The 31 January 2026 is not just the final date for submission of the 2024-25 self-assessment tax return but also an important date for payment of tax due. This is the final payment deadline for any remaining tax due for the 2024-25 tax year. In addition, the 31 January 2026 is also the usual payment date for any Capital Gains Tax due in relation to the 2024-25 tax year and also the due date for the first payment on account for 2025-26. Note that any CGT due on the sale of a second residential property must be paid within 60 days of the sale, not in the following January.

In summary, filing your tax return early offers a clearer financial picture, helps spread the workload, and ensures you’re not caught out by deadlines. If you are due a refund, there’s no reason to wait as filing early means a quicker refund.