Options you might not have considered for settling 2025 payment arrangements in time

Around this time of year, we start to see the same conversations come through: clients working to balance what can realistically be settled now and what might need a different approach.

If you’ve got clients with 2025 payment arrangements in place with Tax Traders that may not settle by 18 June, you’re probably already working through what that means – including how to manage their exposure to use‑of‑money interest and late payment penalties if things don’t quite land in time.

The good news is that this doesn’t have to be a 'Boyz II Men moment' (i.e. the end of the road).

There are still several practical ways to ensure your clients successfully cross the 2025 finish line with flying colours that may not have crossed your mind.

A few ways to sort outstanding 2025 payment arrangements

While every client situation is different, there are three approaches we are commonly seeing firms take where a 2025 payment arrangement is at risk of not settling by 18 June.

Use Taxi to fund the gap

Where clients have deposits sitting in the Tax Traders tax pool for the 2026 income year, those deposits can be used as security to access affordable funding through our sibling company Taxi.

That funding can then be used to clear the remaining balance on a 2025 payment arrangement.

A key advantage of this approach is that the underlying deposits remain intact in the pool, provided the funding is repaid in full. In practice, that means:

• No exposure to the 75‑day rule that applies to the transfer of purchased funds from the tax pool to Inland Revenue (IR).
• No adverse impact on a client’s imputation credit account.
• Continued flexibility for how those deposits can be used in the future.
  

Up to 90% of a client's tax deposit can be accessed with Taxi, at an interest rate that is half the cost of a big bank overdraft.

For many clients, this provides a clean way to close out 2025 without creating additional constraints to manage down the line.

Swap 2026 deposits back to an earlier tax position

Alternatively, 2026 deposits can be swapped back to an earlier tax position to address a 2025 shortfall.

This can be an effective way to resolve a position quickly, particularly where sufficient deposits already exist in the pool.

However, it is important to be aware that when deposits are swapped that they revert from own funds to purchased tax pooling funds.

This means the 75‑day legislative time limit applies in terms of those funds needing to be transferred to IR. Implications for the client’s imputation credit account also need to be considered.

In practical terms, this approach can work well in the short term but may introduce timing and compliance considerations to manage for the 2026 tax year.

Prioritise 2025 and use the IR debt‑recovery pilot for earlier years

For clients who also have income tax debt relating to the 2023 and/or 2024 tax years, IR’s debt‑recovery pilot programme may provide additional flexibility.

For those who meet the eligibility criteria and have a payment arrangement with Tax Traders in place by the legislative deadline, the pilot allows earlier‑year debt to be settled over a longer timeframe (up until 1 October 2027).

This creates an opportunity to think about sequencing.

Rather than trying to resolve all historic positions at once, it may make sense to focus on bringing the 2025 position to a close and then deal with earlier-year debt through the pilot programme over time.

This can help reduce immediate pressure, while still ensuring all obligations are addressed in a structured way.

How to think about the right approach

There is no one‑size‑fits‑all answer here. You could use a combination of all three approaches, depending on what’s going on for each client.

Of course, the right approach will depend on several factors, including:

• Your client’s cash flow position.
• Whether they have deposits sitting in the pool.
• How important it is to preserve flexibility into the following tax year.
• Whether earlier‑year debt is also in play and eligibility for the IR pilot is met.

What is consistent across all scenarios, though, is that the 18 June deadline for 2025 payment plans does not necessarily close the door. It simply changes the way the conversation needs to be approached.

The Tax Traders team is here to help

If you have clients in this position and would like to talk through the options, we are always happy to help.

Sometimes a short conversation is all it takes to sense check the best path forward and make sure nothing is missed.