For example, if your tax bill for 2019/20 was £1,500 – during the 2020/21 tax year, you’ll make two payments on account of £750 each. When you submit your 2020/21 tax return, these two payments are deducted from your tax bill.
So, if your 2020/21 tax bill was £3,000, £1,500 (two payments of £750 on account) will be deducted on 31 January and 31 July that year. And you’ll have to pay £1,500 as a balancing payment, plus an extra £1,500 as your first payment on account for the 2021/22 tax year.
If your tax bill is less, HMRC will send you a refund. If you know your tax bill will be lower, you can contact HMRC and ask for a reduction on your payments on account.