HMRC Time to Pay lets you set up a plan to pay your Self Assessment tax bill in instalments if you’re struggling to meet the 31 January deadline.
Download your free in-depth guide to completing your own self employed tax return. Get instant access to expert hints and tips in the click of a few buttons.
While HMRC says that if you can pay on time, you should, it’ll agree to a plan with those facing financial hardship or personal difficulty.
What’s more, HMRC has changed its Time to Pay service for people who can’t pay Self Assessment because of coronavirus. While taxpayers usually need to call HMRC, the change makes it easier to set up a plan online using a self-serve tool.
If you don’t think you can pay the tax you owe, you shouldn’t ignore the situation. That’s because HMRC charges interest on late tax payments and penalties if they’re more than 30 days late.
So if you can’t afford to pay, you can use Time to Pay to come to an arrangement with HMRC.
You pay your tax bill in monthly instalments through a Time to Pay arrangement. HMRC will charge interest but won’t charge additional penalties (interest and any outstanding penalties are covered by the arrangement).
The arrangement is based on your individual circumstances. You’ll usually need to complete an income and expenditure assessment, which works out how much you can afford to pay and how much time you’ll need to settle your debt.
HMRC won’t typically ask you to pay more than 50 per cent of your disposable income – plus Time to Pay is flexible. So if you have the money, you can pay more. But if your situation worsens, you can lengthen the arrangement.
It’s important to note that if you can pay your tax bill, you should. An HMRC Time to Pay arrangement is based on your income and expenditure and HMRC reserves the service for those in financial difficulty.
Plus, because of the added interest, it’ll end up costing you more to clear the debt in the long run.
If you’ve considered this and still think you can’t pay your tax bill, you should get in touch with HMRC as soon as possible.
That’s because if you don’t pay (and don’t set up an arrangement with HMRC) you’ll get penalties:
HMRC can also take enforcement action to get the tax owed. The tax authority might take you to court, collect money directly from your bank account, or use debt collection agencies.
You can call HMRC through the Self Assessment payment helpline – the number is 0300 200 3822 and it’s open Monday to Friday 8am to 4pm. Ask to talk about Time to Pay.
So, it’s good news that HMRC has made it easier to apply for an arrangement online if you’re struggling to pay your tax bill on 31 January 2021.
Whereas the online service was previously only available to those paying tax up to £10,000, from 1 October 2020 you can use the service if you owe up to £30,000 on 31 January 2021.
You can spread your payment over 12 months by Direct Debit. You need to:
Interest will be applied to the outstanding amount. You can use the tool by signing in with your Government Gateway user ID and password.
You might still be able to use Time to Pay if you owe more than £30,000 or need more than 12 months – you’ll just need to call the helpline instead. You’ll also need to call to discuss tax liabilities other than Self Assessment.
HMRC estimates that 95 per cent of Self Assessment taxpayers will qualify for the online service and won’t need to speak to an HMRC adviser.
Payment on account helps you pay your tax bill in advance. On 31 January, you pay the remainder of your tax bill for the previous tax year, as well as a portion of your estimated tax bill for the current tax year.
But in reality, if someone is already in financial hardship, making a payment on account can make the situation worse.
With this in mind, the government had already automatically deferred payments on account not made on 31 July 2020.
This means that in January 2021, Self Assessment customers can use Time to Pay online to defer (up to 12 months):
So if you can’t afford payment on account you don’t need to worry – it’ll be covered by your payment plan too.
What do you think about HMRC’s changes to its Time to Pay service? Let us know in the comments below.
We create this content for general information purposes and it should not be taken as advice. Always take professional advice. Read our full disclaimer
3 December 2020 • 2-minute read
A new Simply Business survey reveals that local shops and businesses are expecting a significant hit to their earnings this Christmas, with…
21 November 2012 • 2-minute read
Last month Costa Coffee suffered an embarrassing defeat at the hands of the people of Totnes. Residents of the Devon town reacted with such…
6th Floor99 Gresham StreetLondonEC2V 7NG
Sol House29 St Katherine's StreetNorthamptonNN1 2QZ
© Copyright 2021 Simply Business. All Rights Reserved. Simply Business is a trading name of Xbridge Limited which is authorised and regulated by the Financial Conduct Authority (Financial Services Registration No: 313348). Xbridge Limited (No: 3967717) has its registered office at 6th Floor, 99 Gresham Street, London, EC2V 7NG.