Short answer: Connaught Gardens on the clifftop are free, open all year and the best place in Sidmouth to sit with a view. The esplanade is level, and the Anchor Inn in the middle of town is the best pub here.
The esplanade first — a row of white Regency hotels facing the sea with red cliffs behind. Level, short, and the obvious place to start.
Connaught Gardens on the clifftop are free, open year-round and well kept even in January. The best sit-down view in town.
For something longer, east towards Weston — half a mile of empty beach reached by a twenty to thirty minute walk.
Sidmouth's beach is pebble at the top and sand once the tide drops, which makes the entry easier at low water. Jacob's Ladder is the western beach below Connaught Gardens.
New Year's Day swims on this coast are organised by lifeboat crews, surf clubs and pubs rather than councils, and most are announced in the last fortnight of December on local Facebook pages. Check there rather than expecting a listing.
If you are getting in: the sea is colder on 1 January than at any point in the summer, cold water shock is the real risk rather than the temperature itself, and it is worth going in with people rather than alone. Walk in, do not dive, and get warm clothes on quickly afterwards.
Almost everywhere opens later than usual on New Year's Day, and some places do not open at all. Ring in the morning rather than assuming.
The red cliffs at Sidmouth are actively unstable, and wet winter weather makes rock falls more likely rather than less. Sections of Jacob's Ladder beach have been fenced off after landslips. Keep well away from the cliff base wherever it is signed.
Much of the beach is submerged at high water. If the plan is a beach walk rather than the esplanade, check the times.
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