The freelancer tax mistake that costs £2,000+ (and nobody warns you about)

You finish your first year freelancing. You file your tax return. You pay what HMRC says you owe. Then — surprise — they ask for another payment. Same amount. Due immediately. Payment on Account If your tax bill is over £1,000 (and less than 80% was collected at source), HMRC makes you pay advance payments towards next year's tax . Two payments: 31 January — 50% of last year's bill 31 July — another 50% So if your first year's tax bill is £4,000, your January payment is actually £6,000. The tax itself plus the first payment on account. Nobody tells you this. Not your mates. Not the YouTube videos. Not even most "first tax return" guides. The maths that ruins January Year 1 profit: £35,000 Tax + NI owed: ~£5,200 First payment on account (50%): £2,600 Total due 31 January: £7,800 You budgeted for £5,200. You're £2,600 short. Happy new year. How to not get caught out Set aside 30% of everything you earn , not 20%. The extra covers payment on account Reduce payments on account if this year