As part of the Coronavirus support put in place by the government, anyone who is self-employed could decide to defer their second self-assessment payment on account that was due on 31 July 2020.

However, paying the deferred payment on accounts on 31 January 2021, along with any other tax falling due at that time, could result in a massive tax bill this coming January. For this reason, the government, intending to mitigate the problem, has improved its “time to pay” measures.

A Time to Pay (TTP) arrangement allows taxpayers with tax liabilities of up to £30,000 to spread their payment over an additional 12 months from 31 January 2021. This can be done entirely online without having to contact HMRC.

The enhanced TTP service can be used where a tax bill is between £32 and £30,000 provided that the taxpayer has no other existing tax liabilities or payment plans set up, tax returns are up to date, and it is no more than 60 days since the tax was due for payment.

Taxpayers whose tax bills exceed the £30,000 will have to contact HMRC self-assessment helpline as usual.

Benefits of TTP

Although the deferred July 2020 payment on account can be paid at any time between now and 31 January 2021, HMRC has now made it easier for taxpayers to pay this in instalments.

Where the 2019-20 tax return is filed early, it will be clear at that point what payments are owed before the 31 January 2021 payment deadline and you can set up a Time to Pay instalment arrangement with HMRC after 48 hours of applying.

Another benefit of the Time to Pay scheme is that late payment penalties can be avoided, as long as the arrangement was entered into before the penalties become due and all tax owing under the agreement is paid on time.

Interest, however, continues to be payable under Time to Pay instalments.

For more information, please refer to HMRC website.

Can I reduce my payments on account towards 2020-21 tax year?

Payments on account are based on the previous year’s tax bill. If COVID-19 has impacted your financial situation you may have a reduced tax liability arising for the 2020-21 tax year, so you may be able to reduce your 2020-21 payments on account.

Need advice?

If you believe that you may not be able to pay your Self-Assessment tax or if you think you can benefit from reduced payments on accounts for next year, please contact us to discuss the matter. We can advise on the best course of action.