Last month the Chancellor announced that HM Revenue and Customs (HMRC) will allow self employed workers more flexibility to pay their personal self-assessment tax bills with an enhanced self employed payment plan known as Time to Pay.

Time to Pay

A Time to Pay Arrangement with HMRC is a debt repayment plan for self employed workers outstanding taxes. Recently HMRC announced an increase in the threshold for paying tax liabilities from £10,000 to £30,000 for self assessment customers. The aim is to help ease potential financial burden due to the ongoing Covid 19 pandemic.

As part of the Government’s package of support for business and self employed workers, the deadline for any self assessment tax payment due by 31st July 2020 was deferred until 31 January 2021. Self employed tax payers do not have to contact HMRC and will not have to pay a penalty and they can settle their deferred July 2020 payment on account in full any time between now and 31 January 2021 using the online service.

Anyone unable to pay in full by 31 January 2021 can pay in installments by applying for a Time to Pay arrangement. HMRC advises anyone able to do so, to file their tax return as early as possible, so the amount of tax can be calculated. That will allow those eligible to apply for a Time to Pay installment plan. 

Late payment penalties are charged when tax remains unpaid 30 days, 6 months and 12 months after its due date for payment. You can avoid them if you enter into a Time to Pay arrangement before they become due and you pay all the tax owing under that arrangement on time. Interest is payable on Time to Pay instalments so check the guidance on interest rates for late and early payments. Interest will be applied to any outstanding balance from 1 February 2021.

Eligibility 

Applicants must meet the flowing criteria:

• No outstanding tax returns
• No other tax debts
• No other HMRC payment plans set up
• Debt needs to be between £32 and £30,000
• Set up no later than 60 days after the due date of a debt

Accessibility

The Time to Pay application facility was adapted in July with the addition of an online application, in an effort to avoid funnelling all applicants via HMRC’s busy call centres. This means that self employed applicants do not have to speak to a HMRC representative over the telephone to request payment support up to the amount of £10,000.

The increased self-serve Time to Pay limit of £30,000 follows the Chancellor of the Exchequer’s announcement on 24 September to increase support for businesses and individuals through the winter months and inevitable economic uncertainty.

Mr Sunak has said that self assessment customers can pay their deferred payment on account bill from July 2020, any outstanding tax owed for 2019 to 2020 and their first payment on account bill for this current tax year in monthly instalments, up to 12 months, via this self-serve facility.

Self employed workers who will need longer than 12 months to settle their tax bill for this period are advised to contact HMRC in the usual way on the Self Assessment Payment Helpline. 

HMRC are also able to help spread the cost of paying tax for self employed workers who owe more than £30,000, although this cannot be set up online. HMRC needs to be contacted directly. 

Self Assessment Payment Helpline: 0300 200 3822. 

Breathing Space

Financial Secretary to the Treasury, Jesse Norman, said:

We are supporting jobs by giving more breathing space to up to 11 million Self Assessment taxpayers when managing their tax affairs.

Enhancing Time to Pay should ease the financial burdens and protect the livelihoods of these taxpayers, as they navigate the months ahead.

More than 11 million customers complete a self assessment tax return each year. Once they have completed their tax return for the 2019 to 2020 tax year, those who have payments to make may have the option of using the online self-serve Time to Pay facility through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.

HMRC estimates around 95% of self assessment customers 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.

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