Paying your self assessment tax bill
Nov 11, 2020
Covid-19 Tax Tax Tips
As we find ourselves in a second national lockdown, the continuation of yet more coronavirus-related upheaval for businesses comes alarmingly close to the upcoming deadline for paying self assessment tax return bills.
Back in the summer, the financial impact of Covid-19 led many individuals to take advantage of the opportunity to delay paying their July 2020 Payment on Account – statistics from HMRC show that tax revenues amounted to £4.8bn in July 2020, compared to £9.34bn the previous year. However this deferral now means that many people are now facing a much higher self assessment tax bill in January 2021 than they would do normally.
It’s important to be aware of how much tax you’re going to owe in January, and how you’re planning to pay your bill. If you submit your 2019/20 return before HMRC issues its December 2020 statements, then these will show all the payments that you will have due on 31 January 2021.
The payments you owe could include:
- deferred July 2020 Payment on Account (if it remains unpaid)
- any 2019/20 balancing charge
- first 2020/21 Payment on Account
Paying your self assessment tax in instalments
If you don’t feel that you’ll be able to pay your self assessment tax bill in full by 31 January, you can set up an agreement with HMRC to pay in instalments and thereby avoid any late payment penalties. This is called a Time to Pay (TTP) arrangement.
Provided you don’t owe more than £30,000 in tax, then you can set this up online without having to contact HMRC directly. Make sure you allow at least 48 hours after you’ve filed your return before setting up an online payment plan. You must also ensure that you’ve set it up within 60 days of the tax payment being due.
You don’t need to prove that you’ve been directly impacted by Covid-19 in order to delay payment of your self assessment tax bill. However, you must make sure that you have no outstanding tax returns or any other tax debts. If you already have a TTP arrangement in place for other overdue tax, you’ll need to contact HMRC to amend that arrangement.
If you ensure that all the tax you owe under the TTP arrangement is paid on time, you won’t incur any penalties. However, you will have to pay interest at 2.6% on all your outstanding tax from 1 February 2021.
Reducing your Payments on Account
Be aware that your Payments on Account are based on your previous year’s tax bill. If you feel that the impact of coronavirus on your financial situation means that you are likely to owe less tax for the 2020/21 tax year, then it may be a good idea to contact HMRC and request that your 2020/21 Payments on Account bill for January and July 2021 be reduced accordingly.
If you have any concerns about paying your tax bill or issues in setting up a TTP arrangement then please get in touch with the PT team and we’ll be happy to help.