Time to Pay will give self employed workers more time to pay their self-assessment tax bills. The Chancellor announced in his Winter Economy Plan that outstanding tax bills due by January 31 could be paid over the following 12 months. The extension is designed to help workers and businesses that are struggling to pay and cannot meet the January 31 2021 deadline because of COVID-19. In the latest article form Caroline Streatfield Bookkeeping, we give you a quick reminder of how self-assessment works, how you access the Time to Pay scheme, the instalment process, and how to get help should you need it.
You will still need to file your tax return by 31 January 2021
Those in the self-employed category usually fall within the Self Assessment system and have to file their tax return and pay their tax bill by 31 January every year. Some also have a second deadline date in July, which is known as payment on account. This had previously been extended until 31 January 2021. These payments can now be deferred further until January 2022. But if you do want to use the HMRC Time to Pay option, you must do it as soon as possible. HMRC does charge interest on late payments and penalties if you are more than 30 days late. However, businesses that can make their tax payments should do so.
Paying in instalments – how Time to Pay works
Once you have filed your Self Assessment tax return, you may be able to pay instalments so the full amount is delayed until 31 January 2022. It should be noted that interest will be applied to the outstanding balance, starting from February 1 2021. However, additional penalties such as interest and any outstanding penalties will not be charged.
- You owe £30,000 or less
- You do not have any other payment plans or debts with HMRC
You will then be able to choose how much to pay straight away and how much you want to pay each month. This will be based on your individual circumstances, as you will need to complete an income and expenditure assessment. This will work out how much you can afford to pay and how much time will be required to pay the debt in full. Time to Pay is flexible and HMRC won’t usually ask you to pay more than 50% of your disposable income.
Setting up a payment plan
You can set up a payment plan online or call the Payment Support Service. When you set up online, you will need your Government Gateway User ID and password. In order to be eligible, you must not have any outstanding tax returns or other tax debts or any other HMRC payment plans set up. HMRC has changed its Time to Pay service for people who would incur financial hardship or personal difficulty, making it easier to set up an online plan. If you do need to talk to somebody, call 0300 200 3822 for the helpline, which is available form Mon-Fri 0800-1600. Ask to talk about Time to Pay.
Changes to the VAT deferral scheme
Businesses who chose to defer their VAT payments between March and June 2020 will now be able to make interest-free payments over the 2021-22 tax year. This option is available, rather than paying the full amount by March 2021. Again if you can make your payments you should do so. More information will be available soon.
How can Caroline Streatfield Bookkeeping Help Your Business
There really isn’t long to go before the deadline of 31 January to file your tax return online. If you want to take advantage of the Time to Pay scheme, you must do it now. The team at Caroline Streatfield Bookkeeping is here to help if you are struggling or require more information. Call us on 07982 682746 or 01323 885205 or email info@bookkeepereastbourne.co.uk to find out more.
