If your HMRC Payment on Account (POA) was paid late from your limited company’s bank account instead of your own, two issues need fixing: interest on the late payment and correcting the entry in your company’s books as a Director’s Loan Account, rather than a business expense.
Neither issue is typically disastrous — the money isn’t lost, and you usually don’t need to inform HMRC.
It’s common to discover these two separate problems around either early August or early February, because HMRC’s Payment on Account deadlines fall just a few days before, on January 31st and July 31st.
As Qdos CEO Seb Maley warned ahead of the July 2026 deadline, missing a Payment on Account deadline can be a “red flag”. That’s true in the sense that it can potentially trigger HMRC scrutiny. However, neither paying your POA bill late, nor paying it via your company, is usually catastrophic, even if both need addressing.
Before I outline how to rectify arguably the most common Payment on Account mistakes, first a recap for any new company directors.
What is a Payment on Account?
Payments on Account are advance payments towards your personal Self-Assessment tax bill — typically required when your previous year’s tax bill exceeded £1,000 and less than 80% of your tax was collected at source.
Payments on Account are due personally, by you as an individual, even though most of your income may come through your limited company. HMRC views this liability as yours, not your company’s. And that distinction is the root of the second of the following two mistakes, below.
What happens if the payment was late?
If your Payment on Account was paid after the ‘due date’ (January 31st or July 31st), HMRC will usually charge late payment interest, starting from the due date until the payment is received.
The longer the delay, the larger the charge. For most of the sole-person and few-person limited companies whose tax affairs I’ve specialised in for 16 years, HMRC’s focus is on collecting the outstanding tax and interest rather than imposing further penalties, provided the tax is ultimately paid.
Why paying your Payment on Account from your company is a separate mistake
A Payment on Account is a personal tax liability, so it’s clearly a mistake — on top of being late — to pay it from your limited company bank account.
Once the funds leave your account to pay the POA bill, your limited company can’t simply treat the payment as a business expense, because it doesn’t relate to the company’s trade. It isn’t PAYE, isn’t an allowable business cost, and it could distort your current tax year’s personal tax position.
If the company pays a bill that belongs to you personally, HMRC effectively sees the company as having settled your liability — and that needs the right accounting treatment.
Is the company’s payment on account to HMRC lost?
No. The payment has still reached HMRC and should still be credited against your personal Self-Assessment account. The issue isn’t usually with HMRC’s allocation. The issue is how the payment gets recorded in the company’s books.
How to fix your company paying the HMRC payment on account?
The fix to making the payment from your company (when, as a director, you should have made it personally) is to record it in your books as money taken by the director — not a business expense.
And the simplest way to do that is to post the payment to the Director’s Loan Account (DLA). In effect: the company paid a personal bill on the director’s behalf, so the company is owed that money back. This avoids incorrectly reducing company profits with a non-deductible personal expense.
Let me provide two examples.
Example of Payment on Account mistake (1): James paid from a limited company
In the first of two examples provided here, meet James – he’s a limited company director.
James’ Payment on Account is £4,500.
By mistake, James paid it directly to HMRC from his company bank account.
However, James’s company shouldn’t record this as an expense. Instead, his company bank balance simply falls by £4,500, and James’s Director’s Loan Account becomes overdrawn by the same amount — effectively, the company has lent its director the money.
Example of Payment on Account mistake (2): Sarah’s company paid, and paid late
Meet Sarah — she runs an IT consultancy through her limited company. She forgot her £6,000 July Payment on Account, and three weeks later, paid HMRC but, in the panic, she wrongly paid with her company card. Two issues now exist for Sarah: HMRC interest accruing from the original due date, and a personal liability paid through the company.
Sarah quickly notifies her accountant. That very same day (and our accountancy firm strongly believes proactivity massively matters), payment is posted to Sarah’s Director’s Loan Account. The payment is not treated as a company expense by Sarah, who later transfers £6,000 from her personal bank account to the company bank account to fully correct the position.
Should you repay the company?
If you can, yes. Best practice is to transfer the amount from your personal account back into the company account, which restores the correct position. That way, HMRC keeps the tax payment, the company is reimbursed, and the DLA returns to normal. Many limited company accountants will recommend correcting this as soon as the mistake is spotted — and we’d endorse prompt repayment, too.
What if I don’t repay the company?
Technically speaking, it’s permissible for directors to leave the amount in the Director’s Loan Account, where it remains as a loan owed by the director, provided proper records are kept.
Leaving it unpaid, though, can create further complications.
For example, director’s loan tax rules may apply, benefit-in-kind considerations could arise in some circumstances, and additional reporting obligations may be triggered. The exact position depends on the balance and how long it’s outstanding.
Should I inform HMRC that my company paid my personal payment on account?
Generally, no — not simply because the payment came from the wrong bank account. HMRC’s concern is whether the correct taxpayer received credit for the correct amount.
When must HMRC be told about a ‘wrong’ Payment on Account?
Contact HMRC promptly if your company’s payment was allocated incorrectly, the wrong reference was used, or it appears against the wrong tax account.
The accounting correction of a company-paid Payment on Account is normally handled within the company’s own bookkeeping and accounts.
Six steps if Payment on Account was by your company and late
- Confirm HMRC has allocated the payment correctly
- Make sure it isn’t recorded as a company expense
- Post the amount through the Director’s Loan Account
- Consider repaying the company from personal funds
- Check whether interest has arisen from late payment
- Discuss any outstanding DLA balance with your accountant.
Payment on Account FAQs: Paid by company and paid late
Is a Payment on Account a personal or company liability?
Personal — it belongs to you as an individual, not your limited company.
I accidentally made a Payment on Account from my company bank account; what do I do?
Don’t treat it as a company expense; instead, post the payment to the Director’s Loan Account (DLA). Then pay the company back from your personal funds.
Is the tax payment to HMRC lost if it came from the wrong account?
No — HMRC still credits it to your personal Self-Assessment account. The correction is a bookkeeping one.
What if I can’t repay the company straight away, as James or Sarah did?
You don’t have to repay it immediately — the amount can sit in the Director’s Loan Account. But the longer it’s outstanding, the more likely additional tax rules on overdrawn loans could apply, which is why most contractors repay as soon as they’re able to, as James and Sarah both did.
The bottom line
Missing either of the two Payment on Account (POA) deadlines as a self-assessment taxpayer can result in interest charges.
However, paying your Payment on Account from your company bank account creates a second, separate issue, because the tax belongs to you personally, not your limited company.
In the experience of our accountancy team who’ve successfully sorted the taxes of directors up and down the UK ever since 2013, the fix to paying a personal liability from a limited company is usually straightforward: treat the payment as a director’s loan, correct the bookkeeping, and repay the company from personal funds where appropriate.
If this has happened to you and your current accountant didn’t steer you properly, it’s worth a coffee with one who works specifically with contractor limited company owners.
