If you file a Self Assessment tax return, you will have seen the term "balancing payment" on your HMRC tax calculation and wondered exactly what it covers. It sounds technical, but the idea behind it is simple.
A balancing payment is the difference between the total tax you actually owe for a tax year and what you have already paid towards it through payments on account. It tops up the gap so your account for that year is settled in full.
This guide explains what a balancing payment is, when it is due, how it sits alongside payments on account, and what happens if you pay it late. It is written for sole traders, landlords and anyone else who settles their tax through Self Assessment.
If you would rather not work this out yourself, that is exactly what we handle through our Self Assessment service.
What is a balancing payment?
A balancing payment is the final amount of tax you owe for a tax year once your payments on account have been taken off. You work it out by deducting the payments on account you have already made from the total tax due for that year. Whatever is left is the balancing payment, and it is due by midnight on 31 January following the end of the tax year.
How does a balancing payment work?
When HMRC works out your Self Assessment bill, it does two things. It calculates the total tax you owe for the year just gone, and it compares that with anything you have already paid towards it.
Most people who owe tax through Self Assessment make advance instalments called payments on account. These are payments towards your next tax bill, including Class 4 National Insurance if you are self-employed. They are based on your previous year's bill, so they are an estimate rather than your real figure.
Because they are an estimate, they rarely match your actual bill exactly. The balancing payment is what squares that off. If your real tax bill comes in higher than the payments on account you made, the balancing payment is the extra you owe. If your bill comes in lower, you may have overpaid and could be due a refund instead.
In short, the balancing payment closes the year off. It is the "true-up" between the estimate you paid in advance and the tax you genuinely owe once your return is filed.
When is a balancing payment due?
Your balancing payment is due by midnight on 31 January following the end of the tax year. That is the same deadline as filing your online tax return, so the two fall on the same date.
For the 2025/26 tax year, which ended on 5 April 2026, the balancing payment is due by 31 January 2027. For the 2026/27 tax year, the balancing payment will be due by 31 January 2028.
It helps to keep the deadlines straight, because Self Assessment has several that cluster around the same dates:
| Self Assessment task | Deadline (for a tax year ending 5 April) |
|---|---|
| Register for Self Assessment (first time) | 5 October after the tax year ends |
| File a paper tax return | Midnight 31 October after the tax year ends |
| File an online tax return | Midnight 31 January after the tax year ends |
| Pay your balancing payment | Midnight 31 January after the tax year ends |
| First payment on account | Midnight 31 January after the tax year ends |
| Second payment on account | Midnight 31 July after the tax year ends |
The key point is that 31 January does double duty. It is both your filing deadline and the date your balancing payment (plus any first payment on account for the new year) must reach HMRC.
How do payments on account affect your balancing payment?
Payments on account are the reason a balancing payment exists at all. Each payment on account is usually half of the tax you owed the previous year, and they are due by midnight on 31 January and 31 July.
You do not have to make payments on account if either of these applies:
- The amount of tax you owed last year was less than 1,000 pounds, or
- You paid more than 80% of the tax you owed last year through your tax code or other deductions, such as PAYE.
If you have made payments on account, HMRC deducts them from your total tax bill for the year to arrive at your balancing payment. So the bigger your payments on account, the smaller your balancing payment will be, and vice versa.
There is a knock-on effect to watch for. On the same 31 January that your balancing payment is due, your first payment on account for the next tax year is usually due as well. If your income has grown, that first instalment is based on the higher year you have just reported, so the total leaving your account in January can be noticeably more than the balancing payment alone. Planning for that combined figure is where a lot of people get caught out.
Illustrative example: working out a balancing payment
Illustrative example. This follows the same structure HMRC uses in its own guidance.
Imagine Daniel is a self-employed sole trader. His Self Assessment bill for one tax year works out at 3,000 pounds. During that year he had already made two payments on account of 900 pounds each, based on his previous, smaller year. That is 1,800 pounds paid in advance.
His balancing payment is the total bill minus the payments on account already made:
| Item | Amount |
|---|---|
| Total tax bill for the year | £3,000 |
| Less: payments on account already made (£900 + £900) | £1,800 |
| Balancing payment due | £1,200 |
So Daniel owes a balancing payment of 1,200 pounds (3,000 pounds minus 1,800 pounds).
But that is not the only thing due on 31 January. He also has to make his first payment on account for the next tax year, which is half of his latest 3,000 pound bill, so 1,500 pounds. That brings the total due by 31 January to 2,700 pounds (1,200 pounds plus 1,500 pounds). A second payment on account of 1,500 pounds then follows by 31 July.
These figures are illustrative. Your own balancing payment depends entirely on your actual tax bill and the payments on account you have already made.
What happens if you pay a balancing payment late?
Missing the 31 January deadline for your balancing payment costs money on two fronts: penalties and interest.
For late payment, HMRC charges a penalty of 5% of the tax unpaid at 30 days, a further 5% at 6 months, and another 5% at 12 months. On top of that, you are charged interest on the amount owed for the whole period it is late.
Interest runs daily from the due date until you pay, and the rate can change, so it is worth clearing the balance as soon as you can rather than letting it build. If money is tight, HMRC may let you spread the cost through a payment plan, but you need to arrange that rather than simply not paying.
The practical takeaway is to know your balancing payment figure well before January, not on the night itself. Once your return is prepared, the number is fixed, so there is no reason to be surprised by it. If you want that worked out and filed in good time, our team can take it off your plate through our Self Assessment service, and you can sense-check your own position first with our self-employed tax calculator.
Want your balancing payment calculated, checked and filed with time to spare? Book a free call with a Zmartly accountant and we will make sure you know exactly what is due and when.
Frequently asked questions
What is a balancing payment in Self Assessment?
It is the final amount of tax you owe for a tax year after your payments on account have been deducted from your total bill. You take the total tax due for the year, subtract the payments on account you have already made, and the remainder is your balancing payment.
When is a balancing payment due?
By midnight on 31 January following the end of the tax year. That is the same date as the online filing deadline, so for the 2025/26 tax year the balancing payment is due by 31 January 2027.
What is the difference between a balancing payment and a payment on account?
Payments on account are advance instalments towards your next tax bill, usually half of your previous year's bill each, due on 31 January and 31 July. A balancing payment is the catch-up at the end that settles the difference between those estimated instalments and the tax you actually owe.
Do I always have to make a balancing payment?
Not always. If your payments on account already cover your full bill, there is nothing left to pay, and if they exceed your bill you may be due a refund. You also will not make payments on account at all if last year's tax was under 1,000 pounds or more than 80% of your tax was collected at source, in which case your whole bill is effectively settled as one balancing payment.
What happens if I pay my balancing payment late?
HMRC charges a late payment penalty of 5% of the unpaid tax at 30 days, 6 months and 12 months, plus interest on the amount owed until you pay it. Arranging a payment plan with HMRC before the deadline can help if you cannot pay in full.
