Why HMRC might ask you to pay towards next year's tax bill before you've even earned the money, and how to avoid being caught off guard.
You've submitted your Self Assessment tax return.
You've worked out what you owe HMRC.
You've mentally prepared yourself to pay it.
And then you spot another amount labelled "payment on account".
Hang on. Why are you being asked to pay MORE tax?
If you're a self-employed personal trainer, online fitness coach or fitness instructor, this can be one of the most confusing parts of running your own business.
Especially if nobody explained it when you first became self-employed.
The good news?
Payments on account aren't an extra tax.
They're advance payments towards your next tax bill. But if you're not expecting them, they can create a serious headache for your cash flow.
Let's break it down.
What actually are payments on account?
When you're self-employed, you usually pay Income Tax and Class 4 National Insurance through Self Assessment.
Unlike an employee whose tax is deducted from their wages each month, you're responsible for making sure enough money is available when your tax bill arrives.
HMRC uses a system called payments on account to collect some of that tax in advance.
Instead of waiting until the following January for the entire bill, you may be asked to make two advance payments. These are normally due on:
31 January
31 July
Each payment is generally calculated as 50% of your previous year's relevant Self Assessment tax bill.
The important thing to understand is that these payments go towards your NEXT tax year. They're not an additional charge.
Think of it like paying towards your next year's tax bill in instalments.
Although, unlike your gym membership, it's probably not a direct debit you look forward to.
Who has to make payments on account?
Not every self-employed fitness professional has to make payments on account.
Generally, HMRC requires them when:
Your previous year's relevant Self Assessment tax bill was £1,000 or more.
AND
Less than 80% of your total tax liability was collected at source, for example through PAYE.
This means a personal trainer who is fully self-employed may need to make payments on account.
But someone who earns most of their income through employment and has tax deducted through PAYE might not.
It depends on your individual circumstances.
Payments on account normally cover Income Tax and Class 4 National Insurance.
They don't generally include student loan repayments or Capital Gains Tax.
That's why it's important to understand what makes up your tax bill rather than assuming every amount shown on your Self Assessment calculation is treated the same way.
Why your first big tax bill can feel like a shock
Let's use an example.
Imagine you're a self-employed personal trainer. You've completed your first Self Assessment tax return and your relevant tax bill for the year is £3,000.
You might reasonably expect to pay £3,000 by 31 January.
But HMRC may also ask you to make your first payment on account towards the following tax year. That payment would be £1,500.
31 January
Tax owed for the previous year: £3,000
First payment on account: £1,500
TOTAL DUE BY 31 JANUARY: £4,500
31 July
Second payment on account: £1,500
TOTAL DUE BY 31 JULY: £1,500
That's £6,000 paid across those two dates.
£3,000
your tax bill for the year you've just reported
£3,000
paid in advance towards your next year's bill
But here's the important bit.
You're not being charged £6,000 of tax on £3,000 of liability.
The additional £3,000 is being paid towards your next year's bill.
When you submit that next tax return, HMRC takes those advance payments into account.
Depending on your actual tax liability, you may have a balancing payment to make, or you may have paid too much.
The problem isn't necessarily the amount of tax.
It's being unprepared for WHEN you need to pay it.
What if your fitness business earns less next year?
This is where things get interesting.
Let's say you had a brilliant year as an online fitness coach. You launched a new coaching programme, signed more clients and earned more profit than expected.
HMRC calculates your payments on account based on that year's tax liability.
But what happens if the following year looks different?
- Maybe you've reduced your coaching hours.
- Maybe you've invested in growing your business.
- Maybe your profits have fallen.
If you genuinely expect your next tax liability to be lower, you can ask HMRC to reduce your payments on account.
But be careful.
You should only reduce them if you have a reasonable basis for believing your liability will be lower.
If you reduce them too much, HMRC can charge interest on the shortfall.
This is where having up-to-date bookkeeping and a clear understanding of your profits becomes really useful.
Because guessing your tax bill isn't much of a financial strategy.
How to avoid the January tax panic
The biggest mistake I see isn't necessarily that business owners don't earn enough money to pay their tax.
It's that they haven't planned for the payment.
Money comes into the business. Bills get paid. Personal drawings get taken. And then January arrives.
Suddenly, the money that looked available isn't actually available.
Here's what I recommend.
Keep your bookkeeping up to date
If you don't know how much profit your business is making, it's difficult to estimate how much tax you might owe.
Your bank balance isn't the same as your profit. And your turnover definitely isn't the same as your profit.
Keeping accurate records throughout the year gives you a much clearer picture.
Set money aside regularly
Don't wait until your tax return is due to start thinking about paying it.
Build a tax savings habit into your monthly financial routine.
The amount you need to set aside will depend on your profit, other income and personal circumstances. There isn't one percentage that works for every fitness business owner.
A personalised tax estimate is much more useful than picking a random number and hoping for the best.
Understand your payment dates
Put these dates in your diary:
31 January: Self Assessment balancing payment and, where applicable, first payment on account.
31 July: Second payment on account, where applicable.
Knowing what's coming gives you time to prepare.
Submit your tax return early
You don't have to wait until January to submit your tax return.
Submitting earlier means you can find out what you owe sooner. And that gives you more time to plan.
You generally don't have to pay earlier simply because you've submitted your return early.
You just get the benefit of knowing your numbers.
Review your cash flow
Your business might be profitable on paper and still struggle to pay its bills. That's why cash flow matters.
If you know a tax payment is coming, you can plan for it alongside your regular business expenses. For fitness businesses, that might include:
- Gym or studio rent
- Equipment costs
- Software subscriptions
- Insurance
- Coaching platforms
- Staff or subcontractor payments
The goal is to make sure your tax bill doesn't derail everything else you're working towards.
What if you can't afford your payment on account?
First, don't ignore it.
If you're struggling to pay HMRC, it's important to understand your options as early as possible.
Depending on your circumstances, you may be able to arrange a payment plan with HMRC. This is commonly referred to as a Time to Pay arrangement.
Interest may still apply, and arrangements are subject to HMRC's conditions.
If you expect your tax liability to be lower, it may also be worth checking whether reducing your payments on account is appropriate.
But remember, a reduction is based on your expected tax liability.
It's not simply a way to postpone a payment because cash is tight.
Getting advice early can help you understand the difference and decide what to do next.
Your business needs more than a tax return
Here's something I feel strongly about.
Your accountant shouldn't just tell you what happened last year. They should help you plan what happens next.
And payments on account are a perfect example of why.
If you're only looking at your finances once a year, it's easy for tax payments to catch you off guard.
But when you understand your numbers throughout the year, you can make better decisions.
- You can see what's affordable.
- You can prepare for upcoming payments.
- You can understand whether your business is actually profitable.
- And you can stop treating your tax bill like an unexpected plot twist.
At Koyn, that's exactly what we're working towards. Our Financial Fitness Method is built around three things:
Clarity
Clear numbers. Clear decisions.
Confidence
Decisions backed by numbers.
Growth
Sustainable profits built to last.
Because being financially fit isn't about never having a tax bill.
It's about knowing what's coming and having a plan.
Let's get your business financially fit
Whether you're a self-employed personal trainer, online fitness coach or fitness instructor, understanding your tax responsibilities is an important part of running a successful business.
But you don't need to figure everything out on your own.
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A practical guide for self-employed fitness professionals. Get organised, understand your numbers and take the stress out of your tax return, including payments on account.
Includes a printable one-page checklist.
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Book a Clarity CallThis article provides general information about UK Self Assessment payments on account and is not personalised tax advice. Tax rules and individual circumstances vary. Always check your position with HMRC or a qualified accountant before making financial decisions.