- Self-employed income tax receipts were £17.1 billion in July, up almost 11% from July 2025 HMRC tax receipts and National Insurance contributions for the UK - GOV.UK
- The monthly self-employed income tax take for July has more than doubled in just five years since July 2021 – shortly after the income tax thresholds were frozen
- July income tax spikes because self-employed people are making payments on account.
- Overall we paid £40.9 billion in income tax in July – up 8% from a year earlier
- The monthly income tax take for July has risen by 80% (or £18.2 billion) since July 2021
Sarah Coles, head of personal finance at AJ Bell, comments:
“Self-employed people will be licking their financial wounds after meeting the business end of the usual July spike in income tax. It’s particularly painful, because the tax they paid through self assessment in July has more than doubled since the income tax thresholds were frozen in 2021.
“The month sees the deadline for payments on account, when many people will have to pay half the year’s tax bill. Self-employed people have not been immune to the damaging impact of the frozen income tax thresholds, because when profits rise with inflation, it pushes them into paying higher tax bills. It’s a significant reason why their July bills were up 11% in a year and have more than doubled since the thresholds were frozen in 2021.
“At the same time, overall income tax taken in July was £40.9 billion up from £37.8 billion a year earlier, as more employed people have fallen victim to fiscal drag too. Given that the thresholds are set to remain frozen until 2031, this is far from the last of the tax pain.
The July payment explained
“In addition to paying a tax bill at the end of the tax year on 31 January, some people paying tax under self assessment need to make a payment on account on 31 July. This will apply if you owed more than £1,000 in tax last year and less than 80% of the tax you owed was paid outside self assessment. Most of these people are self-employed.
“On 31 January 2026, they will have made what’s known as the ‘balancing payment’ for 6 April 2024 to 5 April 2025 – covering the remainder of any bill from that tax year. They will also have had to make a payment towards the April 2025 to April 2026 bill – which will be 50% of the previous year’s bill. Then in July they pay the other 50%. After they’ve done a tax return for that year, the taxman will either make up the difference by asking for a balancing payment the following January, or pay a refund.
“It effectively means half of a self-employed person’s annual income tax bill may be paid in July – hence the spike.”
7 ways to control an income tax bill:
- If you make extra pension contributions you get tax relief at your highest marginal rate, so contributions over the higher rate threshold are particularly rewarding.
- If you’ve used all your tax-efficient pension allowance for this year, you can carry forward allowance from the previous three tax years – as long as you don’t pay in more than this year’s income.
- If you risk paying tax on savings interest, it’s worth considering a Cash ISA, where your savings can grow completely free of tax.
- Consider tax planning with the wider family. If your spouse or civil partner pays a lower rate of tax, you can transfer assets between you, so you both take advantage of your pensions, ISA allowances and other annual allowances.
- If you are on the verge of seeing your income drop into a lower tax band – such as on retirement – you could consider deferring income until after the change. You could, for example, save in fixed rate bonds that pay interest on maturity – after your retirement.
- Plan ahead, so if you expect your retirement income to cross a threshold, where some is taxed at 40%, you can use ISAs alongside your pension, which could give you the opportunity to withdraw taxable income up to the threshold, and untaxed income over it.
- Consider whether a Venture Capital Trust or Enterprise Investment Scheme is right for you. These are very high risk, so should only be a small part of a large, diversified portfolio, but they offer 20% income tax relief.
