Paying your tax (and National Insurance)

MTD changes how you report, not how you pay. Your tax and National Insurance payment dates are unchanged from the old Self Assessment system.

What's due on 31 January

All of the following are due by 31 January following the end of the tax year:

• Income tax for the year just ended.
• Class 2 National Insurance (for self-employed people whose profits are below the small profits threshold and who choose to pay voluntarily; see below).
• Class 4 National Insurance (for self-employed people above the Class 4 threshold).
• Any balancing payment after payments on account.
• The first payment on account for the next year (if applicable).

For the first MTD year (2026-27), these are all due by 31 January 2028.

Payments on account

If your tax bill (after tax already collected at source) is £1,000 or more, HMRC asks you to pay half of next year's estimated bill on account. The next payment on account is due 31 July of the same year.

So for the 2026-27 tax year, you'd typically make:

Payments on account are estimates based on last year's tax. They're not final, any under- or over-payment is squared up at the next balancing payment.

National Insurance in a nutshell

If you're a sole trader:

• Class 2 NI, a flat weekly amount. It's treated as paid if your profits are at or above the small profits threshold (£6,845 in 2024-25, rising slightly each year; the exact figure for 2026-27 will be confirmed by HMRC closer to the time). If your profits are below that threshold, Class 2 is not compulsory, but you can pay voluntarily to protect your State Pension record, £3.50 per week in 2025-26 and £3.65 per week in 2026-27.
• Class 4 NI, a percentage of profits above the Class 4 threshold (£12,570 in 2026-27). This is calculated automatically by your software as part of the final declaration.

If you're only a landlord (no sole-trade income), property profit isn't subject to Class 2 or Class 4 NI, it's taxed under the property rules, not the trading rules.

Both Class 2 and Class 4 are paid through the same 31 January payment as your income tax. You don't get a separate invoice.

How to actually pay

HMRC accepts:

• Direct Debit (single payment or Budget Payment Plan).
• Bank transfer (Faster Payments, CHAPS, Bacs) to HMRC's account.
• Debit card online (personal, not business).
• Cheque through the post.
• At a bank or building society (with a paying-in slip).

Faster Payments reach HMRC the same or next working day. Debit card is near-instant. Cheques are slow, post them at least a week before the deadline.

Use your Unique Taxpayer Reference (UTR) followed by the letter K as the payment reference. HMRC matches payments to your account using this.

Time to Pay

If you can't pay on time, you can set up a Time to Pay arrangement with HMRC. This is a formal payment plan that spreads what you owe over monthly instalments, usually up to 12 months.

The key thing to know: setting up a Time to Pay arrangement stops penalties from accruing from the day you contact HMRC, as long as you keep to the agreed schedule. It doesn't stop interest (interest runs until the debt is paid), but it stops penalties.

You can set up a Time to Pay online for smaller balances via your HMRC account, or by phone for larger or more complex cases.

Late payment interest

If you pay late, you also owe interest from the day after the due date. The interest rate is set by HMRC and changes periodically. Interest is separate from (and on top of) any late-payment penalties.

First-year easement on late payment

From the 2027-28 tax year onwards, the standard 15-day grace period applies again. See Penalties for the full penalty structure.

Refunds

If you end up having paid too much, through payments on account that were too high, tax already deducted at source, or because your actual position was lower than expected, HMRC will refund you after you submit the final declaration. You can nominate a bank account in your HMRC online account; refunds are usually paid within a couple of weeks.

Setting money aside

Many sole traders and landlords set aside tax money as they go, in a separate savings account. A rough rule of thumb:

• Sole trader, basic-rate taxpayer: keep aside about 25–30% of profits (income tax + Class 2 + Class 4).
• Sole trader, higher-rate territory: closer to 40–45%.
• Landlord, basic-rate: roughly 20% of profits (no NI).
• Landlord, higher-rate: roughly 40%.

These are rough. Your software's in-year tax estimate is a better guide, but setting aside a little more than the estimate is a very comfortable habit.

Sources

• Self Assessment tax returns: deadlines (GOV.UK)
• Self-employed National Insurance rates (GOV.UK)
• Pay your Self Assessment tax bill (GOV.UK)
• Time to Pay (GOV.UK)