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December 29th 2020

How to spread your January 21 tax bill using HMRC’s online service

Many taxpayers facing a large Self Assessment bill this January will now be able to arrange a payment plan through their HMRC online account, enabling them to spread payment over 12 months.

Until last month, taxpayers wishing to spread payments usually had to speak to HMRC staff or provide details of income and expenditure.

Once your tax return for the year ended 5 April 2020 has been submitted, if you qualify for a payment plan you can set it up online at any time up until the end of March 2021.

Taxpayers should aim to complete and submit their 19/20 tax return at the earliest opportunity (the submission deadline is 31 January 21), giving more time to plan ahead and budget for any liabilities.

The new service will be particularly helpful to the many taxpayers who took advantage of the deferral of the 2019/20 second payment on account, which would have fallen due in July 2020 in normal circumstances.

To arrange an instalment plan, you will need to log onto hmrc.gov.uk using your Government Gateway details. You’ll need to meet the following criteria:
- no outstanding tax returns, debts or existing payment plans;
- you owe no more than £30,000;
- the plan must be set up within 60 days of the original payment due date; and
- the instalments must be paid by direct debit.

Taxpayers can pay a lump sum up front if they wish, as well as specifying the time period over which instalments are to be made (up to 12 months).

Interest will be charged from 1 February 2021 on any amounts unpaid by 31 January 2021, until HMRC receives payment. The current rate of interest is 2.6% pa. However, no penalties should be applied, as long as you stick to the instalment plan (or vary it with HMRC’s agreement).

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