Self Assessment tax planning shouldn’t necessarily stop once you have filed your return and know how much tax you need to pay.
In fact, the final tax calculation can raise just as many questions as it answers. Why is the January payment much higher than the tax due for the year? Are your payments on account still realistic if your income has fallen? And what happens if your income has increased? Could you be getting close to a tax threshold that affects the amount you keep?
These are questions worth asking while there is still time to do something about them
What has changed since the tax year ended?
Your 2025/26 tax return records what happened between 6 April 2025 and 5 April 2026. By the time you prepare it, your circumstances may already look quite different.
Your income might have increased or fallen, you may have started or stopped a business, or your property or investment income could have changed.
As a result, the tax liability on your latest return isn’t necessarily a good guide to what you will owe next time.
There is another reason to pay attention to the figures this year. For some sole traders and landlords, the 2025/26 income will determine whether Making Tax Digital for Income Tax applies from 6 April 2027
HMRC is introducing MTD for Income Tax in stages. Your qualifying income determines when you need to join. We’ll explain later in this guide how the £30,000 test works and why it isn’t based on taxable profit.
So rather than filing the return and forgetting about tax until next January, it is worth considering what those figures might be telling you about the year ahead.
Why is your January tax payment higher than expected?
A higher-than-expected January tax payment is often the first thing that prompts people to think about Self Assessment tax planning.
The reason is frequently payments on account. These are advance payments towards your next Self Assessment bill. Where they apply, you normally pay them on 31 January and 31 July.
HMRC usually calculates each payment as half of the previous year’s relevant tax liability. This can make the amount due in January look surprisingly high. You aren’t necessarily paying tax for just one year.
Your January payment can include a balancing payment for the tax year already ended. It can also include the first payment on account towards the following year’s liability.
Understanding that distinction is important, particularly if your income has changed since the previous tax year.
Has your income changed since the tax return year?
Payments on account use your previous tax liability to estimate what you will owe next. That works reasonably well when your income remains fairly consistent.
But the calculation can produce the wrong result when your circumstances change.
Perhaps your self-employed profits have fallen, you have stopped trading or you have sold a rental property. Your rental income might have reduced, or more of your income may now be taxed through PAYE.
In these circumstances, payments based on your previous tax bill could be higher than the amount you eventually need to pay.
HMRC allows you to apply to reduce your payments on account if you expect your tax liability to be lower.
Should you reduce your payments on account?
There is an important word in that previous sentence: expect.
Any reduction should be based on a reasonable estimate of what you are likely to owe. Reduce your payments too far and HMRC can charge interest if your eventual liability is higher.
Rather than automatically accepting last year’s figures, estimate your current year’s position. You can then decide whether the payments still make sense and, if not, by how much to reduce them.
What if your income has fallen?
Looking at one source of income in isolation doesn’t always tell you where you stand for tax purposes.
You may know your salary or how much profit your business made. But your tax return brings that figure together with your other taxable income. Dividends, rental profits, savings interest and self-employment income can all change the overall picture.
Don't reduce payments simply to improve cash flow
Any reduction should be based on a reasonable estimate of what you are likely to owe. If you reduce your payments too far and the eventual liability is higher, HMRC can charge interest on the difference
Rather than automatically accepting last year’s figures, estimate your current year’s position. You can then decide whether the payments still make sense and, if not, by how much to reduce them.
Could your total income change your tax position?
Looking at one source of income in isolation doesn't always tell you where you stand for tax purposes
You may know your salary or how much profit your business made. But your tax return brings that figure together with your other taxable income. Dividends, rental profits, savings interest and self-employment income can all change the overall picture.
That becomes particularly useful when looking at the current year. If your 2025/26 income continues at a similar level, you can start to estimate where you might be by 5 April 2027.
The question isn’t simply whether you will earn more this year. It is whether the additional income takes you across a point where the tax treatment changes.
Could you lose your Personal Allowance?
One threshold that can have a particularly significant effect is £100,000 of adjusted net income
Once your adjusted net income exceeds £100,000, you lose £1 of Personal Allowance for every £2 above the threshold. At £125,140, you normally lose the allowance completely.
For taxpayers in England, Wales and Northern Ireland, this creates an unusual result. You pay 40% higher-rate tax while gradually losing your Personal Allowance. Together, these can produce an effective 60% Income Tax rate on income falling within this band.
What matters here is your adjusted net income, rather than simply the salary or business profits you might normally focus on. Dividends, savings interest, rental profits and other taxable income can all affect the calculation.
Certain pension contributions and Gift Aid donations can reduce adjusted net income. If your latest return shows that you are already close to £100,000, it can be particularly useful to estimate where you might be by 5 April.
Could your income result in a Child Benefit tax charge?
If you or your partner receive Child Benefit, another figure to watch is £60,000 of adjusted net income
The High Income Child Benefit Charge starts when the higher earner’s adjusted net income exceeds £60,000. The charge then increases as income rises. At £80,000, the charge equals the full amount of Child Benefit received.
This is another reason why looking only at salary can give the wrong impression. Dividends, savings interest, rental profits and other taxable income could take you above the threshold even if your salary remains below £60,000.
If your 2025/26 return shows that you are already close to the threshold, estimate your 2026/27 position before 5 April. That is more useful than discovering the result when you prepare next year’s return.
Could a pension contribution reduce your adjusted net income?
The figures on your tax return may show that your adjusted net income is above, or close to, one of the thresholds we’ve just covered.
This is where pension contributions can become relevant. Depending on the type of contribution, paying into a pension can reduce adjusted net income and provide Income Tax relief.
If your adjusted net income exceeds £100,000, a pension contribution could help restore some or all of your Personal Allowance.
It can also affect the High Income Child Benefit Charge if your adjusted net income exceeds £60,000.
There are limits, however. The amount that can benefit from tax relief depends on your earnings and circumstances, The pension annual allowance can also restrict the amount of tax-relieved pension saving available in a tax year.
Before making a contribution for tax reasons, you therefore need to know your expected adjusted net income. You should also check how much you have already contributed and how much annual allowance remains available.
Could you contribute more than this year's pension allowance?
If your tax return shows an unusually high level of income, you may be considering a larger pension contribution before 5 April
In some cases, you can carry forward unused annual allowance from the previous three tax years. This may allow you to contribute more than the current year’s annual allowance without an annual allowance tax charge.
But check the calculation before assuming that unused allowance is available.
You must normally have been a member of a registered pension scheme in the relevant earlier year. You also use the earliest available year’s unused allowance first.
Contributions already made can also affect the amount available. For some higher earners, the tapered annual allowance can reduce it further.
If you are considering a substantial contribution, check your available allowance first. This can help you avoid an unexpected pension tax charge later.
Could your 2025/26 income put you into Making Tax Digital?
For some sole traders and landlords, there is another figure on the 2025/26 return that needs attention: gross business and property income
If your qualifying self-employment and property income exceeds £30,000 for 2025/26, you will normally need to use Making Tax Digital for Income Tax from 6 April 2027.
The figure that matters isn't necessarily the profit on which you pay tax.
Could you be within MTD with profits below £30,000?
Yes. This is one of the easier parts of the MTD rules to misunderstand
The £30,000 threshold isn't a profit test. HMRC looks at your qualifying income, instead.
If you have more than one self-employment or property business, the relevant income is combined..
Broadly, this means your gross income from self-employment and property before deducting expenses.
If you have more than one self-employment or property business, you combine the relevant income from each source.
For example, suppose you receive £22,000 of gross rents and have another £12,000 of turnover from a self-employed business. Your qualifying income would be £34,000
Even if expenses reduced your combined taxable profits to £20,000, MTD could still apply from April 2027 because your qualifying income exceeds £30,000.
There is another useful distinction. Salary, dividends and pension income don’t count towards the MTD qualifying income test. You need to check your qualifying self-employment and property income instead.
So, if your taxable profit is below £30,000, don't assume that MTD won't apply. The gross income figures on your 2025/26 return may give a very different answer.
Further guidance: HMRC – Work out your qualifying income for Making Tax Digital for Income Tax.
Will MTD change the way you keep your records?
If MTD applies to you from April 2027, the biggest change may not be the tax calculation itself. It could be how and when you keep your business or property records.
Under MTD, you need to keep the relevant records digitally using compatible software. You will also need to send quarterly updates to HMRC.
If you already keep your bookkeeping up to date throughout the year using suitable software, you may already do much of what MTD requires.
The position is different if your records are dealt with retrospectively.
Perhaps you prepare a spreadsheet at the end of the year or work from bank statements. You might send your accountant a year’s worth of information in one go. Under MTD, that process may no longer be suitable.
Your 2025/26 return should therefore help you answer two questions. Does MTD apply from April 2027? If it does, are your current records ready for it?
How different does 2026/27 look from last year?
By the time you complete your 2025/26 tax return, you may already be well into the following tax year. You now have something useful to compare: last year’s final figures and what is actually happening now.
Perhaps your business is having a much stronger year, or profits have fallen. You may be taking larger dividends, receiving more rental income or earning interest that wasn’t significant last year.
There may also have been a one-off event. Perhaps you sold a rental property, shares or cryptoassets during 2026/27. Any resulting tax liability won’t appear on the return you have just completed.
What could those changes mean for your tax liability?
The differences between the two years could have a direct effect on what you eventually need to pay
If your income has increased, the effect isn’t always limited to paying tax on the extra amount. Your total income could take you across one of the thresholds we’ve covered, changing your overall tax position.
The opposite can also be true. Lower business profits or rental income could mean that payments based on last year’s liability are too high.
And some events create a tax liability of their own.
For example, you might dispose of property, shares or cryptoassets during 2026/27. That disposal won’t appear on your 2025/26 return, but you may still need to put money aside for the resulting tax.
The point isn’t to predict your next tax bill to the penny. It is to spot whether 2026/27 is heading in a materially different direction from 2025/26. You can then consider what that means while there is still time to act.
What should you do once your tax return is completed?
Once you have filed your Self Assessment return, take one final look at the figures before putting it to one side.
The aim isn’t to revisit the return you’ve just completed. Instead, use those figures as a starting point for the tax year you are in now.
Compare last year’s income with what you expect to receive this year. Then think about anything significant that has changed since 5 April. Could it affect your tax position?
You don't need to forecast everything precisely. You are simply looking for differences that are large enough to deserve attention.
Why does it matter before 5 April?
By January, most of the current tax year has already happened. You should therefore have a much clearer idea of whether this year looks anything like the one before.
There is also still time to consider anything that looks significantly different.
That doesn’t mean there will always be something to do. In many cases, a review will simply confirm that no action is needed.
But if something has changed, it is better to identify it before 5 April. Waiting until you prepare the next tax return may leave you with fewer options.
After the tax year has ended, some decisions can no longer be made for that year.
So, once your 2025/26 return is filed, don’t look only at the amount of tax due. Take a moment to compare those figures with where you are now.
Your tax return tells you what happened last year. The real value may be in what it prompts you to check about this one
If your circumstances have changed since 5 April, or you would like us to review what your latest tax return could mean for 2026/27, get in touch before the end of the tax year.
You can explore our personal tax guides or, if you would like to discuss how we could help your business, complete our Business Questionnaire and a member of our team will be in touch.