Advice + Tax + Accounts for smart business owners.
November 26th 2020

What to do if you can't pay your January tax bill on time

As small businesses continue to face an uncertain future and adapt to the post-Covid world, many taxpayers will have the additional burden of a January tax bill from HMRC. This includes tax due on profits and income earned almost exclusively pre-Covid, including July tax payments on account which were automatically deferred to January 2021 if not paid already.

If tax liabilities arising via Self Assessment are not paid by 31 January, HMRC will charge late payment interest (currently 2.6%). Additionally, if the tax remains outstanding 30 days after the due date, HMRC will normally apply a late payment penalty of 5% of the outstanding tax (and again at 6 months and 12 months late), but there is no penalty charge provided you arrange a payment plan directly with HMRC, and keep up the instalments.

Provided that you owe less than £30,000, and that you don’t have any other payment plans or debts with HMRC, you can arrange the plan through HMRC’s website. You can choose how much you can afford to pay now, and then arrange monthly instalments.

In all other cases, you need to call HMRC’s Self Assessment Payment Support Service (0300 200 3822). A proper payment plan must be in place with HMRC in order to ensure no penalties are charged.

Key things to remember are that your Tax Return needs to have been processed by HMRC first so that your liabilities show on the system (allow at least 72 hours after submission), and that the payment plan should be arranged as soon as possible – and certainly before the first penalty would be charged.

Contact us for further help and information.


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