HM Revenue & Customs (HMRC) has updated its guidance to avoid any confusion and to make it clear that the deferral of payment on accounts applies to all self-assessment taxpayers and not just the self-employed. This includes individuals with investment and property income.
This means that any individual who was due to make a UK tax payment on 31 July 2020, now has until 31 January 2021 to make this payment. The tax payment due on 31 January 2021 will consist of the balancing tax due in respect of the tax year we are due to finish on 5 April 2020, plus the first payment on account towards the new tax year 2020/21.
This is an automatic deferral and no application is required to HMRC. No penalties or interest for late payment will be charged in the deferral period. The tax payment due on 31 January 2021 will therefore consist of the balancing tax due in respect of the tax year we are due to finish on 5 April 2020, plus the first payment on account towards the new tax year 2020/21. Some taxpayers may wish to still make the payment due in July in the normal way if they have the money set aside, and to avoid a large payment in January 2021.
Subject to income levels in the next tax year and the knock-on effects of Coronavirus, UK taxpayers may wish to review their payments on account for the tax year and whether there is scope for a reduction and include a claim in their 2020 tax return. Any UK taxpayer who wishes to defer payment needs to cancel any direct debit set up for this payment on account (direct debits for self-assessment payments on account are specific to each payment).