Need extra time to pay your tax bill due in January 2021?
22 January 2021, Advocates, Artists, Barristers, Creative Industries, Sole Traders
Smarter accounting
22 January 2021, Advocates, Artists, Barristers, Creative Industries, Sole Traders
If you are one of the many self-employed who need extra time to pay your income tax bill at the end of the month, HMRC have an online process to help you spread your payment. With just over a week to go until the filing deadline for 2019/20 tax returns, HMRC has reminded taxpayers that using its time-to-pay system is an option.
2021 has not got off to a good start and with personal tax bills due on 31st January 2021 and a double whammy of VAT due in March, many people are feeling squeezed for cash.
HMRC has repeatedly resisted calls to move the filing deadline for 2019-20 tax returns, despite the coronavirus pandemic. The only real concession to tax payers (or customers as they still insist on calling us) is to extend the time-to-pay system and allow you to pay your tax bill in monthly instalments.
UPDATE – HMRC have announced tax filing deadline extended to end of February.
If you owe less than £30,000 in personal tax you can now set up a time-to-pay arrangement online by logging into your Personal Tax Account. There is no need to speak to anyone over the phone and answer potentially intrusive questions over the ability to pay.
Previously, the time-to-pay system was limited to debts of £10,000. Additionally, if an individual deferred their payment on account due on 31 July 2020, this can also be included in the arrangement as well as the balancing payment.
However, there are some further conditions. In order to use the online self-service you:
It is also possible to set up an informal recurring payment to credit future liabilities. Any shortfall will be payable in the usual way.
You are unlikely to know your tax bill until you prepare and file your 2019-20 return. Even if you haven’t earned anything since April 2020 you will still need to pay tax on your earnings in the previous year.
It is not a sensible option to hold off filing your 2019-20 tax return. If you have not already started, now is the hour!
HMRC normally requires you to pay 50% of your 2020-21 tax bill when you file your 2019-20 return. This is a payment on account for your next year’s tax. If your profits are expected to be lower in the current tax year you can apply to reduce your payments on account. You can reduce your payments on account in your tax return or if you have already filed it, you can apply to reduce the payments online.
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