Following a recent announcement by the Chancellor Rishi Sunak, the government is allowing people who work on a self-employed basis the option to spread the payment of their tax bill for the 2019/2020 tax year over 12 months via monthly instalments. This will help to ease the financial burden for anyone whose business (and cashflow) suffered during the ongoing coronavirus crisis.
However, there are a couple of things that need to be considered before thinking about using this option.
- Firstly, in general, this payment option will only be open to you if you have previously kept all your payments and returns up to date. (see GOV.UK ‘Time to Pay’ for further info)
- Secondly, if you set up a ‘Time to Pay’ arrangement, you will have to pay interest on the tax paid late. Interest will be applied to any outstanding balance from 1 February 2021
Will I Be Eligible For Time To Pay?
If you want to apply for ‘Time to Pay’, you will need to meet the following requirements:
- No outstanding tax returns
- No other tax debts
- No other HMRC payments set up
- Your Self Assessment tax bill is between £32 and £30,000
- It is no more than 60 days since the tax was due for payment
If you meet these criteria and would like to spread your payments over the twelve months, this can be set up online through the government self-serve ‘Time to Pay’ service on the GOV.UK website, once you have completed your 2019/20 year tax return. You will need to have your bank account details to hand, as a direct debit will have to be set up to pay the monthly instalments.
2019/20 Year Tax Return Deadlines
Just to remind you – as our minds are inevitably on other things these days – that the deadline for your 2019/20 return is 31st January 2021. (If you submit this on paper, it should have been received by 31st October 2020).
Even if your trading did not reach the level needed to incur any tax, or if you did not trade at all, please remember that you are required to submit a tax return (even if it is zero) so long as you remain registered for HMRC Self Assessment.
Further information can be found on these topics, as well as general financial advice for businesses affected by the Coronavirus pandemic, on the UK Gov website using the links below: