Millions at risk of triggering 8.25% daily HMRC charge if they don't act this week

Midnight on July 31, 2025 marks a crucial deadline for people to make their second payment on account to HMRC. This affects approximately two million self-employed people across the UK according to CredAbility, alongside countless others with untaxed income such as rental income or dividends.

Money experts are urging those bound to this deadline to act this week or risk being hit with an 8.25% daily interest rate charge from the tax authority. This hefty charge doesn't even include a range of additional penalties HMRC can slap on late payments.

Joe Phelan, money.co.uk business savings account expert, cautioned that leaving the payment until the final moment might not be sufficient. Highlighting the small print of the deadline, he emphasised the payment must be completely cleared by midnight on July 31, not merely sent.

He added: "The July 31st payment deadline can catch sole traders by surprise, potentially creating a sudden and stressful cash flow problem. While it's designed to help spread the annual tax bill, it can feel like a major hurdle if you haven't planned for it.

"Don't delay. Log in to your HMRC portal as soon as you can to confirm the exact amount you owe."

The money expert urged people to plan months in advance for these payments: "To avoid this pressure in the future, the best habit a sole trader can adopt is to treat tax as a regular business expense.

"Every time you get paid, move a set percentage into a dedicated business savings account. This not only makes tax deadlines manageable, but ensures the money you need is working for you, turning a source of stress into a sign of financial health."

Aaron Peake, Personal Finance Expert at CredAbility, added: "People think they're done with tax after January. But if you're self-employed or have extra income, HMRC often expects you to pay again in July. These payments on account are usually half your last bill, so it can be a nasty shock if you weren't expecting it.

"It catches people off guard every single year. You could end up reaching for a credit card or overdraft to cover it, which then knocks on to your other bills. That's when people start missing payments and their credit score takes a hit."

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Payments on account are two advance instalments people can make towards their projected tax liability for the following year. These are typically calculated based on the previous tax year's obligation and prevent taxpayers from facing one enormous tax demand at the year's end. The system also allows HMRC to gather revenue more steadily across the year.

The initial payment must be settled by midnight on January 31, whilst the second instalment is due by midnight on July 31. The late payment interest rate, which is charged daily and can frequently change as it's based on the Bank of England's base rate, currently stands at the base rate plus 4%. With the base rate now at 3.25%, HMRC can charge 8.25% as daily interest on late payments.

Other penalties that HMRC can impose on late tax payments include:

• An initial fixed penalty of £100
• £10 per day up to a maximum of £900 if the tax isn't paid after three months
• A further 5% or £300 penalty if the tax isn't paid after six months
• A further 5% or £300 if the tax isn't paid after 12 months