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Self-Assessment: Taxpayers encouraged to file tax returns now to spread tax bill across the year

Taxpayers are being encouraged to file self-assessment tax returns now to ensure that they can spread their tax bill across 2021 through the ‘Time to Pay’ payment plan service.

Self-assessment tax returns for the period ending 5 April 2020 are due on 31 January 2021, but HMRC has confirmed that taxpayers can delay the deadline and apply for a payment plan to spread the tax bill over the year.

HM Revenue & Customs (HMRC) has increased the threshold for Self-Assessment taxpayers to use its online self-service Time to Pay payment plan service from £10,000 in tax liabilities to £30,000.

The move means that more taxpayers will be able to spread the cost of their tax bills by paying in monthly instalments, without having to call HMRC.

The arrangement means that taxpayers will pay HMRC 2.6 per cent interest from 1 February 2021 but will avoid any late payment penalties.

Taxpayers must set up a payment plan no later than 60 days after the due date of the tax debt to qualify for the payment plan, which, for tax payments due on 31 January 2021 is 1 April 2021.

However, setting up a payment plan more than 30 days after the due date of the tax debt will lead to late payment penalties. This means payment plans in respect of tax due on 31 January 2021 would need to be set up by 2 March 2021.

To qualify for a payment plan using the online self-service Time-to-Pay system, taxpayers must:

  • Have no outstanding tax returns;
  • Have no other tax debts;
  • Have no other HMRC payment plans set up; and
  • Have a debt of between £32 and £30,000.

HMRC has also warned taxpayers against scammers claiming to be from HMRC and offering to set up payment plans. Currently, payment plans can only be set up by individual taxpayers. 

HMRC says that taxpayers may have the option of using the online self-serve Time to Pay facility on gov.uk once they have completed their 2019-20 Self-Assessment tax return.

For help and advice, contact your Seymour Taylor representative today or contact us enquiries@stca.co.uk 01494 552100.

This blog is for guidance only, professional advice should be obtained before acting on any information contained herein. The information was correct at time of publishing 6th January 2021.