What are payments on account and why is my tax bill higher than expected?

Payments on account are advance payments towards next year's tax bill, required once your Self Assessment bill exceeds £1,000 and less than 80% of your tax was collected at source (which covers almost everyone self-employed) — so your January bill is actually last year's balance plus 50% of an estimate of next year's tax, with a second 50% instalment due the following July.

This is exactly why a freelancer's first proper tax bill often comes as a shock: you're not just paying for the year just finished, you're prepaying half of the year still in progress at the same time. If your income drops the following year, you can apply to reduce your payments on account rather than overpaying and waiting for a refund, but if you reduce them too far and turn out to owe more, HMRC charges interest on the shortfall. Understanding this the first time it happens matters more than any other single thing for managing a freelancer's cash flow through the tax year — if this caught you by surprise once, it's worth planning around it properly before it happens again.