With the balancing payment and first payment on account both due on 31 January 2026, it is worth checking your options early if funds are tight.

The final balancing payment for the 2024–25 tax year is due by 31 January 2026, which is also the deadline for filing your self-assessment tax return. This payment will settle any remaining tax owed for the year after taking account of payments on account already made.

In addition to the balancing payment, many self-assessment taxpayers will also have a first payment on account for the 2025–26 tax year due on the same date, which can make January a particularly challenging month for cash flow.

If you are struggling to meet the tax payments due by 31 January 2026 deadline, it is important to take action early, as there are options available to help manage the payment.

Taxpayers with self-assessment liabilities of up to £30,000 can use HMRC’s online Time to Pay (TTP) service to set up instalment payments. This can be done without speaking directly to an HMRC adviser and is available up to 60 days after the payment deadline.

To use the online Time to Pay service, you must:

• Have no outstanding tax returns
• Have no other unpaid tax debts
• Have no existing HMRC payment plans

If you do not meet these criteria, it may still be possible to agree a bespoke Time to Pay arrangement by contacting HMRC directly. These arrangements are assessed on a case-by-case basis and are usually based on your personal or business financial position.

HMRC will generally agree to extended payment terms where they believe the tax can be paid in full over time. However, if HMRC considers that delaying payment will not resolve the issue, they may seek immediate payment and can take enforcement action if the debt remains unpaid.

If you anticipate difficulty in paying your January 2026 tax bill, please do not ignore the problem. Please let us know and we can help you understand what options are available to you.

If your business has transitional profits from basis period reform, spreading over five years may reduce the cash flow impact, but it is important to understand the deadlines.

The self-employed basis period reform has changed the way trading income is allocated to tax years. Under these reforms, the basis of assessment moved from a current year basis to a tax year basis.

As a result, all sole traders and partnership businesses are now required to report their profits on a tax year basis. This change fully came into effect from the self-assessment return due by 31 January 2025, covering the 2023–24 tax year.

Under the old rules, businesses could have overlapping basis periods. This sometimes resulted in profits being taxed twice, with corresponding overlap relief usually given when the business ceased. The move to a tax year basis removed the basis period rules and prevented the creation of any new overlap relief.

The spreading rules for the payment of transitional profits are still available. By default, transition profits are spread evenly over five tax years, from 2023–24 to 2027–28, helping to ease cash-flow pressures. Taxpayers can also elect to accelerate the taxation of transition profits if they wish, but spreading continues to apply automatically unless an election is made.

If your business ceases on or before 5 April 2027, any transition profit remaining after overlap relief that has not yet been taxed must be brought into charge in the final year of trading.