What is Balancing Payment?

Full Definition

The balancing payment is the final settlement of a Self Assessment tax bill, due on 31 January following the end of the tax year (for example, the 2025/26 balancing payment is due by 31 January 2027). It is calculated as the total tax liability for the year minus any payments on account already made and minus any tax already collected at source through PAYE or other withholding. The balancing payment can be: a positive amount (you owe more tax, typically because income was higher than assumed in the payments on account); zero (payments on account exactly matched the liability); or a negative amount (you overpaid via payments on account, giving rise to a repayment from HMRC). Capital Gains Tax and student loan repayments are not included in payments on account but are included in the balancing payment calculation, so they are paid in full by the 31 January deadline. If the balancing payment is paid late, HMRC charges interest from 1 February at the official rate. Late filing penalties and late payment penalties are separate charges. If you expect your income to be lower than the prior year, you can reduce your payments on account in advance; the resulting smaller payments on account reduce (but do not eliminate) the balancing payment. The 31 January deadline also coincides with the first payment on account for the current tax year, meaning that a self-employed person filing their return and making payments in January may face three amounts due simultaneously: the balancing payment for the previous year, the first payment on account for the current year, and any CGT due.

Related Calculators

See Also