January is the month that taxpayers registered for self-assessment need to pay their taxes. Usually, this amounts to any underpayment for the previous tax year and a first payment on account for the current tax year.
Unfortunately, HMRC will base their payment on account for 2020-21 on the self-assessment liability for the previous tax year, 2019-20. As may traders have experienced a downturn in profits during the period of COVID disruption since February 2019, they need to reduce their payments on account for 2020-21 to reflect the lower profit compared to that for 2019-20.
In this way you can recalculate any payments on account for 2020-21 based on the reduced activity.
Even with these reductions in the January 2021, payment on account, many taxpayers will be faced with paying tax bills and have no funds to do so.
In a recent press release, HMRC explained the current support they are prepared to offer taxpayers to spread any tax payments over twelve monthly instalments.
Almost 25,000 Self-Assessment customers have set up an online payment plan to manage their tax liabilities in up to 12 monthly instalments, totalling £69.1 million, HM Revenue and Customs (HMRC) has revealed today (13 January 2021).
In October, HMRC increased the threshold for self-serve Time to Pay arrangements from £10,000 to £30,000 for Self-Assessment customers. Once they have completed their 2019-20 tax return and know how much tax they owe, customers can use the self-serve facility to set up monthly direct debits and spread the cost of their tax bill.
Visit GOV.UK to find out more about Payments on Account.
The self-serve Time to Pay threshold was increased to help businesses and individuals who have been affected by the coronavirus pandemic. Supporting Self-Assessment customers to manage their tax bills can help ease their financial commitments into more manageable monthly payments. To date, the average value of payment plans set up online is £2,821.
Customers can apply for the payment plan via GOV.UK. However, they 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
- the payment plan needs to be set up no later than 60 days after the due date of a debt
NOTE: Be aware of copycat HMRC websites and phishing scams. Taxpayers should always type in the full online address www.gov.uk/hmrc to get the correct link for their Self-Assessment tax return online securely and free of charge.
They also need to be alert if someone calls, emails or texts claiming to be from HMRC, saying that they can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for information on how to recognise genuine HMRC contact.
Source: New feed