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New self-assessment tax deferral option comes at a cost

From 1 October 2020 Self-Assessment taxpayers with tax liabilities of up to £30,000 have been given the opportunity to apply for a 12 month extension to the tax payment deadline using HMRC’s “Time to Pay” self-service facility. Read our summary below.

Last updated: 15 December 2020

The Chancellor recently announced in his Winter Economy Plan that HMRC will extend their “Time to Pay” option for Self-Assessment taxpayers with tax liabilities of up to £30,000. Previously this service had only been available to taxpayers with liabilities of up to £10,000. This has been introduced to further support those who are in financial difficulties as a result of the ongoing COVID-19 pandemic. 

Self-Assessment taxpayers will be able to defer any outstanding tax owed for the 2019/20 tax year, together with their first payment on account for 2020/21. This deferral is not the same as the one announced earlier this year for the second payment on account due for 2019/20. Instead, it is an opportunity for individual taxpayers to set up a time-to-pay arrangement with HMRC, whereby monthly direct debits are made over a maximum period of 12 months up to 31 January 2022. 

Any initial payment and the monthly direct debits are set by the individual, allowing for those who are experiencing difficulties to form their own payment plan tailored to their circumstances. 

This service will require taxpayers to apply directly to HMRC using their online facility. In order to qualify for the “Time to Pay” arrangements, the tax due must be no higher than £30,000 and the individual should have no other debts or outstanding Tax Returns with HMRC. The “Time to Pay” arrangement should be set up with HMRC no later than 60 days after the due date for payment.

The opportunity to apply for the extension also means that payments deferred from July 2020, together with the payments due in January 2021, will not need to be paid in full until January 2022.

Unlike the option to defer the second payment on account for 2019/20 due by 31 January 2020, HMRC will charge interest on the tax owed and interest will start to apply from 1 February 2021. Interest will be charged daily at a rate of 2.6% per annum. This new scheme is therefore not a cost-free option.

Those with Self-Assessment tax payments over £30,000, or who need longer than 12 months to pay in full, may still be able to set up a time to pay arrangement in the usual way, at HMRC’s discretion. In order to do this, the taxpayer will need to contact HMRC’s dedicated telephone number directly.

Speak to an expert

If you are experiencing financial difficulties as a result of the COVID-19 pandemic and feel that the “Time to Pay” arrangement could benefit you, please get in touch with your usual Buzzacott contact or complete the form below and we’ll call you back.

About the author

Jessica Beere

+44 (0)20 7556 1282
beerej@buzzacott.co.uk
LinkedIn

Last updated: 15 December 2020

The Chancellor recently announced in his Winter Economy Plan that HMRC will extend their “Time to Pay” option for Self-Assessment taxpayers with tax liabilities of up to £30,000. Previously this service had only been available to taxpayers with liabilities of up to £10,000. This has been introduced to further support those who are in financial difficulties as a result of the ongoing COVID-19 pandemic. 

Self-Assessment taxpayers will be able to defer any outstanding tax owed for the 2019/20 tax year, together with their first payment on account for 2020/21. This deferral is not the same as the one announced earlier this year for the second payment on account due for 2019/20. Instead, it is an opportunity for individual taxpayers to set up a time-to-pay arrangement with HMRC, whereby monthly direct debits are made over a maximum period of 12 months up to 31 January 2022. 

Any initial payment and the monthly direct debits are set by the individual, allowing for those who are experiencing difficulties to form their own payment plan tailored to their circumstances. 

This service will require taxpayers to apply directly to HMRC using their online facility. In order to qualify for the “Time to Pay” arrangements, the tax due must be no higher than £30,000 and the individual should have no other debts or outstanding Tax Returns with HMRC. The “Time to Pay” arrangement should be set up with HMRC no later than 60 days after the due date for payment.

The opportunity to apply for the extension also means that payments deferred from July 2020, together with the payments due in January 2021, will not need to be paid in full until January 2022.

Unlike the option to defer the second payment on account for 2019/20 due by 31 January 2020, HMRC will charge interest on the tax owed and interest will start to apply from 1 February 2021. Interest will be charged daily at a rate of 2.6% per annum. This new scheme is therefore not a cost-free option.

Those with Self-Assessment tax payments over £30,000, or who need longer than 12 months to pay in full, may still be able to set up a time to pay arrangement in the usual way, at HMRC’s discretion. In order to do this, the taxpayer will need to contact HMRC’s dedicated telephone number directly.

Speak to an expert

If you are experiencing financial difficulties as a result of the COVID-19 pandemic and feel that the “Time to Pay” arrangement could benefit you, please get in touch with your usual Buzzacott contact or complete the form below and we’ll call you back.

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