Do tax deadlines affect the payment terms small businesses use?

January 31st is a key tax deadline each year for anyone who files their accounts via self-assessment, but does it have an impact on the payment terms small businesses use? The landmark date is one of the first major milestones of the new calendar year – and is technically not one deadline, but three. ByRead More

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January 31st is a key tax deadline each year for anyone who files their accounts via self-assessment, but does it have an impact on the payment terms small businesses use?

tax deadline

The landmark date is one of the first major milestones of the new calendar year – and is technically not one deadline, but three.


By January 31st, self-assessment tax returns for the previous year must be submitted online, any balancing payments made to clear the outstanding tax due, and the first payment made ‘on account’ for the next year too.

It’s important to remember that accounts can be filed any time after the new financial year begins on April 6th – so the January deadline only affects those who have not completed their self-assessment earlier in the almost ten-month period.

However, this typically still sees a rush of self-assessed individuals filing their paperwork, and consequently a large amount of tax to be paid in a matter of days.

This is where the red-letter date can have a big impact on the payment terms small businesses use, as many self-assessed business customers will experience a major cash flow hit at the end of January.

Coming so soon after Christmas, this can put some micro-businesses under considerable financial strain, whether due to costs associated with the festive period, or because their own invoices were not paid on time over the holidays.

If you are owed money by self-assessed individuals or micro-businesses, you have a number of potential options.

The first is to operate on strict payment terms in the run-up to Christmas, and until the tax deadline is out of the way – although changing your terms compared with other parts of the year can be awkward.

You might reasonably impose stricter terms anyway on the smallest businesses in your customer base, who may be more likely to miss paying an invoice due to cash flow difficulties, and a cautious approach all year round can pay dividends when major outgoings like tax rear their head.

Finally, you can deal retrospectively with non-payers in the usual way, and it’s important to decide whether you want to be strict in your pursuit of overdue invoices, or more lenient in light of the time of year.

You could incentivise early payment with a small discount – even some accountants offer a percentage discount on their fee for self-assessment clients who pay within 7-14 days, rather than the 28 or 30-day terms they may have been invoiced on.

You are well within your rights to commence debt recovery proceedings on overdue accounts, so if you find you have been unpaid in early February, this should ring alarm bells as an indication that your customer’s finances have been stretched by their tax payments.

Finally, with no more major tax deadlines for self-assessment and National Insurance contributions until the new financial year on April 6th, you might want to permit a period of ‘grace’ if a trusted customer misses their payment out of character.

Whatever approach you take, be aware and be prepared for the potential financial disruption of early February, when cash flow at the very bottom of the supply chain is likely to be stretched more than at any other time of year.

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