Christina Nawrocki FCCA, explains some self assessment tax payers can now spread the cost of their tax bill over 12 months.
Some good news!
As a self assessment tax payer, you can apply potentially to spread the cost of your tax bill into monthly payments. This took effect from 1 October 2020 and you don't have to call HMRC to set it up.
The online self-serve ‘Time to Pay’ service already existed for paying tax liabilities up to £10,000. Now the threshold has been increased to £30,000 in order to ease the financial burden that has arisen for so many people from the COVID-19 pandemic.
Enhancing Time to Pay
If you're in self assessment then you can pay the following in 12 monthly instalments:
Your first payment on account bill for this current tax year
You can set up the direct debit payment in the self-serve Time to Pay facility on the GOV.UK website.
To do this you will need to complete your tax return for the 2019/20 tax year to understand how much you owe HMRC. Then, you will be provided with the option of how you want to fulfil you tax liabilities. Either you'll pay the usual lump sum or, spread the cost over 12 monthly instalments.
If financially this isn't feasible for you and you need longer than 12 months then you should contact HMRC to discuss alternative payment plans.
To set up your self serve Time to Pay arrangements you need to have:
No other payment plans in place with HMRC
No other tax debts
No outstanding tax returns
A tax debt of £32 - £30,000
Your payment plan must be set up no later than 60 days after the due date of your debt
The catch, interest on the outstanding tax
There is a catch in that defering payment beyond January 2021 means HMRC will apply interest at 2.6% on the amount you owe.
Further information is available on the GOV.UK website.
The content of this post was created on 13/10/2020.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.