Spread your tax bill over twelve months

6th October 2020

One of the key announcements in the recent Winter Economy Plan was to allow taxpayers with tax liabilities of up to £30,000 to spread their payment over an additional 12 months from 31 January 2021 via an online self-service Time to Pay facility.

From 1 October 2020 the enhanced Time to Pay service can be used where a tax bill is between £32 and £30,000 provided the taxpayer has no other existing tax debts or payment plans already set up, tax returns are up to date and it is no more than 60 days since the tax was due for payment.

The online payment plan service can already be used to set up instalment arrangements for paying tax liabilities up to £10,000, but this has now increased to £30,000 for Self Assessment taxpayers, to help ease the financial impact of the coronavirus pandemic.

In the Winter Economy Plan, the Chancellor said such taxpayers could pay their deferred payment on account bill from July 2020, any outstanding tax owed for 2019-2020 and their first payment on account bill for this current tax year in monthly instalments, up to 12 months, via this self-serve tool.

Taxpayers who need longer than 12 months to settle their tax bill can still contact HMRC in the usual way.

Once a tax return for the year 2019-2020 is completed, a taxpayer with payments to make has the option of using the online self-serve to set up a direct debit and pay the tax owed in monthly instalments, up to a 12-month period.

HMRC estimates around 95% of Self Assessment taxpayers who are due to make payments on 31 January 2021 could qualify to implement a Time to Pay arrangement using the self-serve Time to Pay facility online, without needing to speak to an HMRC adviser.

Taxpayers wishing to set up their own self-serve Time to Pay arrangements must meet the following requirements: they need to have no:

  • outstanding tax returns
  • other tax debts
  • other HMRC payment plans set up

The debt needs to be between £32 and £30,000 and the payment plan needs to be set up no later than 60 days after the due date of a debt.

Anyone using the facility will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from 1 February 2021.

VAT deferral ‘New Payment Scheme’

The government is also allowing businesses which deferred VAT due in March to June 2020 the option to spread their payments over the financial year 2021-2022.

Over half a million businesses deferred VAT payments. Rather than paying in full at the end of March 2021, businesses will be able to choose to make 11 equal instalments over 2021-22.

All businesses which took advantage of the VAT deferral can use the New Payment Scheme.

Businesses will need to opt in, but all are eligible. HMRC will put in place an opt-in process in early 2021.

To discuss your tax liability, please contact your usual Bishop Fleming advisor.

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