Some CIS subcontractors get a 31 January bill that's bigger than they expected, because it includes a "payment on account" towards the next year. Others never get asked for one. The difference usually comes down to how much of the year's tax the CIS deductions already covered. This guide sets out GOV.UK's rules and HMRC's working for sole traders, with a made-up example. It doesn't say whether anyone should pay or reduce them.
The short answer
- What they are. GOV.UK says payments on account are "payments towards your next tax bill (including Class 4 National Insurance if you're self-employed)". There are two, due "by midnight on 31 January and 31 July".
- How big. "Each payment is usually half of the tax you owed the previous year."
- When you don't make them. GOV.UK says you don't have to if "the amount of tax you owed last year was less than £1,000", or "last year you paid more than 80% of the tax you owed outside of Self Assessment".
- Where CIS comes in. HMRC's manual (SALF303) says the calculation "takes tax deducted at source into account". Its own example is "a taxpayer in the construction industry". So CIS deductions reduce the figure that payments on account are based on, and count towards the 80% test.
How HMRC works the figure out
The manual says payments on account aren't based on your whole tax bill, but on "a relevant amount". That's "the amount by which the total income tax assessed exceeds the amount of any income tax deducted at source". Each payment is "50% of the relevant amount".
HMRC's tax calculation summary notes (SA110) for 2025–26 show where CIS fits. The CIS deductions box on the self-employment pages (box 38 short, boxes 81 and 82 full) goes into "Total tax taken off at source". In the section on reducing them, the notes say your two payments on account "should be the lower of the actual Income Tax and Class 4 NICs due (net of tax deducted at source and tax credits on dividends)" for 2025 to 2026 or 2026 to 2027.
The same notes give the two tests in CIS terms:
- if the amount left is "less than £1,000 you do not have to make payments on account for 2026 to 2027"
- "If more than 80% of your tax bill for 2025 to 2026 is met from tax taken off at source ... you do not need to make payments on account for 2026 to 2027"
The manual also says Capital Gains Tax and Student Loan repayments "are excluded from the computation of payments on account".
You don't have to do this sum if you file online. The manual says the online service "will calculate the tax and the following year's payments on account automatically". GOV.UK says your statement or online account "will show you how much they are".
Worked example (made-up figures)
Three sole traders file their first return, for 2025–26. Every figure is invented and rounded. "Bill" means Income Tax and Class 4 National Insurance for the year, before CIS deductions are taken off.
| Kim | Lee | Mo | |
|---|---|---|---|
| Bill for 2025–26 | £6,000 | £6,000 | £3,000 |
| CIS deductions (from statements) | £4,500 | £5,000 | £2,200 |
| Left after deductions | £1,500 | £1,000 | £800 |
| Share met by deductions | 75% | 83% | 73% |
| Payments on account for 2026–27? | Yes: 2 × £750 | No: over 80% | No: under £1,000 |
| Due by 31 January 2027 | £2,250 | £1,000 | £800 |
| Due by 31 July 2027 | £750 | £0 | £0 |
Kim. £1,500 is left, and the deductions met 75% of the bill, so neither exception applies. Each payment on account is half of £1,500. As it's Kim's first return, she made no payments on account towards 2025–26. GOV.UK says that in that case you pay "the full amount of your tax calculation" and "your first payment on account towards your next bill". So 31 January 2027 is £1,500 plus £750.
Lee. £1,000 left isn't under £1,000. But the deductions met more than 80% of the bill, so there are no payments on account. Lee pays the £1,000 balance by 31 January 2027.
Mo. The deductions met only 73%, but the £800 left is under £1,000. No payments on account.
If the deductions had come to more than the bill, there'd be nothing left to base payments on account on. Our guide CIS refund: when you can claim it and how long it takes covers that case.
What happens in the next year
Kim's two £750 payments are towards her 2026–27 bill. Meanwhile, contractors keep taking deductions from her pay through 2026–27. Both count. GOV.UK says CIS deductions "count as advance payments towards your tax and National Insurance bill".
When Kim sends her 2026–27 return (due 31 January 2028), HMRC works out that year's bill. GOV.UK says the balancing payment is "worked out by deducting the payments on account you've made from the total tax you owe". The year's CIS deductions are taken off too. If the year's deductions and payments on account come to more than the bill, GOV.UK says "you may be able to claim a tax refund". If less, there's a balancing payment.
GOV.UK's refund page adds that you may not get a refund "if you have tax due in the next 45 days (for example for a payment on account)". The money is taken off what you owe instead.
Reducing payments on account: the rules
GOV.UK's claim to reduce page says you can apply if:
- "your business profits or other income goes down"
- "the tax relief you are entitled to goes up"
- "tax deducted at source is more than the previous tax year"
The SA110 notes list "it will be covered by subcontractor deductions" as one reason someone might expect more income to be taxed at source.
How: online, through your account ("Reduce payments on account"), on form SA303 by post, or in boxes 10 and 11 of the SA110 pages on a paper return. GOV.UK says "You will need to include the amount you expect to make". The claim must be made by 31 January after the end of the tax year. For 2026–27, that's 31 January 2028.
What GOV.UK and HMRC say about the risks:
- "If you reduce your payments on account and your tax bill is higher than expected, you'll be charged interest on the difference."
- The SA110 notes say you "must make a reasonable estimate", and "If you've been careless or fraudulent in claiming to reduce your payments on account, we may charge you a penalty."
- The manual says a penalty "cannot be sought in cases of innocent error", for example where someone acted in good faith on information that later changed.
Whether to reduce is your decision, or one for an accountant.
FAQ
Do CIS workers pay payments on account? Some do. It depends on the £1,000 and 80% tests, after CIS deductions are taken off.
I've never had to make them before. Why now? GOV.UK says they're based on "the tax you owed last year". If last year's deductions covered less of the bill than before, the tests can come out differently.
Are payments on account a penalty? No. GOV.UK describes them as payments "towards your next tax bill".
Where do I see mine? GOV.UK says to sign in, select your latest Self Assessment return, then "View statements".
Knowing your deductions figure
Payments on account turn on how much of the bill your CIS deductions covered, so the deductions total matters. cissplit reads your CIS statements (PDFs or photos), checks the deduction rate on each one and flags gaps between a contractor's months. Then it totals the tax year, with every statement listed by contractor. Your first 3 statements are free, with no sign-up. It doesn't work out your tax or payments on account, and you still check the figures against your statements.
This isn't tax advice. Check GOV.UK's CIS guidance for subcontractors or an accountant for your situation, and check the figures before you submit anything.