If you submit a self-assessment tax return you may need to consider your options as any second payments on account for 2019-20, are coming due for payment 31 July 2020. In a nut-shell you have three options:
Defer payment until 31 January 2021
As part of his support for taxpayers during the present disruption, Rishi Sunak has given you the opportunity to defer payment of the July instalment until 31 January 2021.
This is generous, but readers should be cautious as this is not a cancellation of amounts due. If you do defer your July payment you will need to plan your cash flow carefully, as the total self-assessment tax (and possibly NIC) due 31 January 2021 will include:
- The deferred July 2020 payment
- Any balance of tax due for 2019-20, and
- The first payment on account for 2020-21.
If you do defer, HMRC have confirmed that they will not charge interest or penalties as long as amounts due are paid on or before 31 January 2021.
Make the July 2020 payment
The deferment is an option. If you have already reserved funds you may prefer to pay the tax and reduce amounts due January 2021.
Reduce tax due 31 July 2020
A third option you could consider is applying to reduce payments on account for 2019-20 and therefore reduce the amount payable 31 July 2020? You can do this if the following applies.
The payments on account – due 31 January and 31 July 2020 – are for the tax year 2019-20. Until your tax return is filed for 2019-20, these payments on accounts will be based on figures for the previous tax year, 2018-29.
If your profits for 2019-20 are lower than those for 2018-29, then you can elect to reduce payments on account for 2019-20.
Accordingly, if you feel that your business profits or other income assessable during 2019-20 were lower than those for 2018-19, then we should consider this option.
Source: New feed