HM Revenue and Customs (HMRC) are being very amenable to individuals who wish to set up an arrangement to pay their tax payments in instalments during the current pandemic.
HMRC have advised that they are allowing individuals two months from 31 January 2021 to set up a payment plan. However, please be aware that If you are considering doing this, you should set up your official arrangement with them before 3 March 2021, or you could find yourself liable to pay more than interest at 2.6% on the payments due.
If you owe 2019/2020 tax in the form of the 31 July 2020 deferred tax payment plus any balancing tax payment due for 2019/2020, you will be liable to pay a surcharge calculated at 5% of the balance, unless this payment is made or you set up a payment plan by 3 March 2021. This could be costly. For example, a surcharge of £600 would be incurred on a £12,000 payment due (£12,000 x 5%).
Please note that this surcharge does not apply to 2020/2021 tax payments on account.
All bar one of our client’s tax returns were filed with HMRC by 31 January 2021 and our advice is that if it is your intention to set up a payment plan please do this before 3 March 2021.
Further guidance on time to pay arrangements can be found here.
Please don’t leave it too late to set up your payment plan.
Stay safe and well
Diane Aldridge ATT
Personal Tax Manager