The last couple of years have been financially difficult for many people and the coming year will bring increased costs - not least of which will be utility bills. The July 2022 payment on account tax bill needs to be paid in a few weeks' time and some taxpayers may find it a struggle. In addition, some may still be owing tax from 2020/21 and have found an additional 5% penalty added to their tax bill.
Self Assessment - Time to Pay
If you submit a personal tax return under Self Assessment and you know you won’t be able to make the 31 July payment, then an application can be made to HMRC under their Time to Pay arrangement. This is an agreement to pay the tax in instalments. For tax due under Self Assessment this can be set up online via a Government Gateway account if:
- Your tax return submissions are up to date (for current arrangements this will be the 2020/21 tax return)
- Your tax bill is less than £30,000;
- The deadline for payment is within 60 days of the payment deadline (30 Sept 2022 for the 31 July 2022 payment); and
- You intend to repay the debt over the next 12 months, or less
What if you’re not eligible for Time to Pay?
If you’re unable to set up a Time to Pay arrangement online (e.g. because the tax you owe is more than £30,000) you may still be able to agree an instalment payment plan. This needs to be done by phone via HMRC's Payment Support Service.
How much would each instalment be?
If you have any savings or assets, HMRC will expect these to be used/sold first and instalments agreed to repay the remainder. The monthly payments will usually be set at approximately 50% of the money remaining each month after other bills have been paid. An income and expenditure assessment form is used to record details and calculate the amount to pay.
What if I don't keep to the agreement?
Once a Time to Pay or other instalment agreement is in place, it must be followed. Defaulting on the agreement will lead to the arrangement being cancelled. The tax will be payable immediately in full and enforcement action may be taken. If HMRC refuses to set up an arrangement for any reason (e.g., because you have defaulted in the past), you will be asked to pay what is owed in full.
Further assistance
If you can’t pay your tax bill in full or on time and are not sure what to do, then please contact us. We will be able to offer you advice on the best course of action to take.
Further detail on the questions HMRC may ask under a Time to Pay arrangement can be found here.
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