UK Payments on Account for US Citizens: Dates, Rules and the Foreign Tax Credit

UK payments on account are two advance instalments of next year's Self Assessment income tax, each normally half of last year's bill, due on 31 January and 31 July. HMRC requires them unless last year's Self Assessment liability was under £1,000 or more than 80% was collected at source. For US citizens, they also change when UK tax counts as paid for the US foreign tax credit.

Americans in the UK meet payments on account the first time they owe tax outside PAYE, often after starting a business, letting property or receiving large investment income. The first January bill can be a shock, because it combines a full year's balance with half of next year's tax. Meanwhile, the IRS works on a calendar year and asks a different question: when was the UK tax paid, and for which year? This guide covers both sides.

How UK payments on account work

HMRC's own explanation of payments on account on GOV.UK sets out the mechanics. Each payment is usually half of the tax you owed through Self Assessment for the previous year, and Class 4 National Insurance is included for the self-employed.

The 31 January and 31 July instalments

The first payment on account is due by midnight on 31 January during the tax year, and the second by 31 July after it ends. Any shortfall is then settled as a balancing payment on the following 31 January. Notably, capital gains tax and student loan repayments are not included in payments on account. They fall into the balancing payment instead.

When payments on account are not required

You do not make payments on account if last year's Self Assessment bill was less than £1,000. Similarly, you are excused if more than 80% of last year's tax was paid outside Self Assessment, for example through PAYE on your salary. That is why many salaried Americans never see them until other income appears.

The first-year cash flow shock

The first year in Self Assessment with payments on account is the most expensive. You pay the whole of last year's bill and the first instalment towards this year on the same date.

An illustrative example

Consider an American consultant in Bristol whose 2025-26 Self Assessment bill is £10,000, with no tax deducted at source and no previous payments on account. The figures below are illustrative, and the pattern follows the GOV.UK example.

As a result, £15,000 leaves the consultant's account on 31 January 2027. In our experience, clients who plan for this in the autumn avoid the late-payment interest that HMRC charges from the day after each due date.

Reducing payments on account with form SA303

If you expect lower income this year, you can ask HMRC to reduce your payments on account online or on form SA303. This is common in the year someone leaves the UK. However, if you reduce them too far and the final bill is higher, HMRC charges interest on the difference.

How payments on account interact with the US foreign tax credit

The US credits UK income tax through the foreign tax credit on Form 1116. The difficulty is timing. The UK tax year runs from 6 April to 5 April, while the US tax year is the calendar year, and payments on account split one UK year's tax across two US years.

Cash method versus accrual method

Under the cash method, the default for most individuals, you claim foreign tax in the US year you pay it. Payments on account made in January and July of 2027 therefore support a 2027 credit, even though they relate to 2026-27 income, some of which was earned in 2026. Alternatively, you can elect the accrual method, which matches UK tax to the income year rather than the payment date. Once made, that election generally binds all later years. Our guide to the foreign tax credit paid or accrued choice compares the two in detail.

Overpayments and refunds

A payment on account is an estimate. If it exceeds the final liability, the excess is not a creditable foreign tax, and an HMRC refund can require a redetermination of a credit already claimed. Our article on foreign tax redetermination after a UK refund explains how to correct the US return. The wider rules on baskets and carryovers sit under our foreign tax credit and double taxation pillar.

UK payments on account and US estimated tax

Payments on account are a UK concept. The US equivalent is quarterly estimated tax under Form 1040-ES, which applies when withholding and credits will not cover your US liability.

Running both systems at once

Most Americans in the UK owe little US tax because UK tax is higher and is credited. Nevertheless, timing gaps can create a US balance, for example on US-source income or the Net Investment Income Tax, which the foreign tax credit cannot reduce. Our guide to estimated tax payments for US expats covers the US side.

Currency conversion of each instalment

Under the cash method, each payment on account is converted into US dollars using the exchange rate on the date you pay it. Under the accrual method, the IRS generally expects the average rate for the year to which the tax relates. Therefore, keep the date and amount of every HMRC payment, not just the annual total shown on the SA302 calculation.

Leaving the UK or moving to the UAE

Payments on account continue to be demanded on the basis of last year's bill even after you leave. Someone who moves from London to Dubai in summer 2026 may still face a 31 January 2027 payment on account for 2026-27, even though most of that year's income may be non-UK income after split-year treatment.

Claiming the reduction early

The UAE levies no personal income tax, so there is no UAE equivalent to offset. Instead, the practical step is to claim a reduction of UK payments on account as soon as you can estimate your final UK liability. Otherwise, the overpayment sits with HMRC until the return is filed, and the US credit position becomes harder to reconcile.

A scenario from our practice

An American client moved from Edinburgh to Dubai in July 2026. Her 2025-26 Self Assessment bill of £18,000 meant HMRC expected £9,000 payments on account for 2026-27. We estimated her split-year UK liability, filed a reduction, and aligned her Form 1116 with the amount actually paid. If you want the same alignment, book a consultation with our team.

Frequently Asked Questions

What are UK payments on account?

UK payments on account are two advance payments towards next year's Self Assessment income tax and Class 4 National Insurance. Each is usually half of last year's Self Assessment bill, and they are due by 31 January and 31 July.

Who has to make payments on account in the UK?

Anyone in Self Assessment must make them unless last year's Self Assessment bill was under £1,000 or more than 80% of last year's tax was collected at source, such as through PAYE. This rule comes from HMRC guidance on GOV.UK and applies to US citizens in the same way as anyone else.

Are payments on account creditable for the US foreign tax credit?

Yes, to the extent they become UK tax actually owed. Under the cash method they are generally claimed in the US year they are paid, while under the accrual method UK tax is matched to the year it relates to. Any amount later refunded by HMRC is not creditable.

Can I reduce my payments on account?

Yes. You can ask HMRC to reduce them online through your Self Assessment account or by sending form SA303. However, if your final bill turns out higher than the reduced payments, HMRC charges interest on the shortfall.

Do payments on account include capital gains tax?

No. Capital gains tax and student loan repayments are not included in payments on account. They are paid as part of the balancing payment due by 31 January after the end of the tax year.

Do I still make UK payments on account after moving to the UAE?

HMRC will still expect them based on last year's bill unless you claim a reduction. If split-year treatment means your UK liability for the year of departure will be lower, claim the reduction early, because the UAE has no personal income tax to offset against UK tax.