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How to use HMRC Time to Pay if you can’t pay your Self Assessment tax bill

4-minute read

How to use HMRC Time to Pay if you can’t pay your Self Assessment tax bill
Sam Bromley

Sam Bromley

4 December 2020

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.

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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.

What is HMRC Time to Pay?

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.

So what happens if I can’t pay my tax bill?

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:

  • if you haven’t paid after 30 days – five per cent of the outstanding tax plus interest
  • if you haven’t paid after six months – another five per cent plus interest
  • if you haven’t paid after 12 months – again, five per cent plus interest

You can use an HMRC tool to estimate your late payment 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.

Using the HMRC Time to Pay helpline

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.

But HMRC’s phone lines don’t always take the strain of Self Assessment season very well.

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.

HMRC Time to Pay coronavirus changes – apply online

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:

  • have no outstanding tax returns
  • have no other tax debts
  • have no other HMRC payment plans set up
  • set up the payment plan no later than 60 days after the due date of a debt

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.

Can’t afford payment on account?

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):

  • their previously deferred payment on account from 31 July 2020
  • any further outstanding tax for tax year 2019-20
  • the first payment on account for tax year 2020-21

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.

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