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Paying Your January Self-Assessment Tax With A Payment Plan

It’s fair to say that many people are facing a tough financial period due to the impact of the Coronavirus and the fact that for many – self-employed individuals, business owners and directors – the self-assessment tax bill is due by 31 January 2021.

The good news is that you should be able to spread out your tax payment with HM Revenue & Customs (HMRC) over a number of months. This is called a ‘time to pay arrangement‘ and allows you to effectively pay your tax bill over a few regular payments. Interest will be added on to your tax liability for the use of this facility but it is fairly small in comparison.

Due to the current crisis, there have been further announcements as the upper limit for spreading your payments as increased from £10,000 to £30,000 and so this is available to many self-assessment tax payers.

How does the ‘Time To Pay’ scheme work?

The ‘Time To Pay’ scheme means that you can spread the following subject to the upper limit:

  • Your deferred payment which was due originally from July 2020;
  • Your balance of your 2019/20 tax liability; and
  • Your first payment on account towards the 2020/21 tax bill.

You should also consider the following information:

  • Interest will be charged from 1st Feb 2021 – currently at 2.6% p.a.;
  • You will need to choose how much to pay initially as a deposit and how much you will then pay monthly;
  • Should you miss a payment then HMRC have the right to demand that the balance is paid immediately; and
  • If an arrangement is set up, this avoids any enforcement action to collect your due taxes, ie. calling in debt collectors etc.

How to check if you’re eligible for online payments

There are five main criteria that must be met for HMRC to consider a payment arrangement as follows:

  • The amount due must be between £32 and £30,000;
  • There must be NO outstanding tax returns to submit (ie. all your tax return submissions have been made up to 05 April 2020);
  • You must not have any other tax debts;
  • You must not have an existing payment plan with HMRC; and
  • You must be able to pay the outstanding tax and interest due within a timeframe of 12 months.

The deadline to set up online payments is by 1st April 2021 for the current tax year and the first payment on account for the coming tax year. However we would recommend that this is arranged as soon as possible as you will still potentially have future tax payments to make.

If you don’t qualify based on the five rules mentioned above, you can still apply for normal (not online) time to pay arrangements.

Generally time to pay arrangements don’t show up in credit searches – but if it ends up with an Individual Voluntary Agreement (IVA) or County Court Judgement (CCJ) being made, that will obviously show up.

Do you need help about setting up a time to pay arrangement with HMRC?

Although the process is relatively straight forward to set up a time to pay payment plan for your income tax bill, we are happy to assist and review your financial position with you.

Please contact us at to request a call back in connection with setting up your HMRC online payment plan.

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