How to pay your Self Assessment liability by instalments

Back in November we reported that a measure introduced by the Government to support tax payers was going to be the ability to defer payments of income tax liabilities due on 31 January 2021 and instead pay them in instalments over a twelve month period.

As we approach 31 January we have been asked by a number of clients how to they can apply for this support measure. Many business owners are still subject to restrictions and unable to trade so are grateful for any support that will help with cash flow.

The scheme is available to taxpayers with liabilities up to £30,000 providing:-

  1. They have no outstanding tax returns
  2. They have no other tax debts
  3. They have no other HMRC tax payment plans

The payment plan needs to be set up no later than 60 days after the due date of the debt and therefore for 31 January liabilities by 31 March at the latest.

Unfortunately, we are not any clearer now than we were in December about how and when lockdown may end and we have been discussing options with clients who may still be unsure what to do about paying their tax liabilities. We still believe that cash is king for those business owners still facing a lot of uncertainties about the future.

So how do you set up an instalments agreement?

If your liability is under £30,000 you can set this up online without needing to contact HM Revenue & Customs. Your tax return needs to have been filed and their guidance advises you to wait 48 hours presumably whilst the return is processed through their systems.

Interest (rate from 7 April 2020 has been 2.6%) will still be due on payments however setting up an agreement will avoid late payment penalties that are usually levied on unpaid tax at 30 days, six months and twelve months.

To set up an agreement you need to log into the government gateway. Please follow this link

If your liability is above £30,000 and you would like to set up an agreement or if you can’t for some reason use the government gateway you can call HMRC on 0300 200 3822.

Posted in Covid-19, Tax.