Due to Covid- 19 the government has provided support to businesses that have been impacted, a part of this is that the deadline to second payment of the account of 2019/2020 has been deferred to 31st January 2021 as oppose to 31 July 2020.

 The Chancellor has also stated that there will be the option to defer payment further with a 12 month Time to Pay extension for anyone that has been impacted by Covid 19. This means that the payments that were due to be paid in January 2021 as a result of the extension can now be spread over the next 12 months with the Time to Pay extension, when agreed with HMRC.

When do you need to make your Self Assessment payments?

If you choose to opt out of the Time to Pay extension then the July 2020 payment will be due 31 January 2021. You will also need to make your first payment on the account for the 2020/2021 tax year, you will effectively be paying the equivalent of a whole tax year in one go with this option.

 However if your business has been impacted by Covid 19 and you choose to agree the Time to Pay extension with HMRC then you will be able to pay your July 2020 second payment and the balancing payment in 12 month instalments before 31 January 2022. You will still have to pay your first payment for the account 2020/2021 tax year, therefore a tax return will need to be submitted by the 31st January 2021 and an agreement for the Time to Pay extension will have to be agreed with HMRC before the January 2021 deadline.

How to apply for the 12 month Time to Pay extension?

In order to agree the Time to Pay extension with HMRC you will have to have had your tax return submitted by 31st January 2021 for HMRC to be able to discuss the 12 month arrangement. Those with a tax debt up to £30000 will be able to set up their 12 month payment plan online if they have difficulties to pay the tax. However if the debt is over £30000 you will need to call HMRC to set up a payment plan.

What are the charges that will be implied on late Self Assessment payments?

If you choose to opt in for the 12 month Time to Pay extension then no penalties will be implied, however there will be interest charged on the arrangement. If your Self Assessment if not filed by the deadline then you will still incur late penalties and fees.

Should you agree to the 12 month Time to Pay extension?

 The 12 month Time to Pay extension should be considered carefully as it may not be beneficial for everyone, it may be useful to pay part or all of the payment before the extended deadline. It is important to know your liabilities, what you owe to HMRC and your cashflow going forward before agreeing to this arrangement.

Caution to take when agreeing to Time to Pay extension?

It is important to agree a plan which you can afford and if a workable arrangement plan is not reached then seeking professional advice would be wise. HMRC are less likely to agree a revised plan if an agreement plan isn’t kept. If your circumstances change and you are not able to pay the amount due it is important to contact HMRC as soon as possible.

Income from the Self Employment Income Support Scheme is taxable

The government launched a Self-Employment Income Support Scheme to help those in the self employed sector that were impacted by Covid 19. This scheme is taxable and you may have to declare it in you Self Assessment for 2019/20. The amounts given were dependant on the average monthly trading profits, the March to May 2020 payment was capped at £2500 per month and any remaining payment to date would fall in the 2020/21 tax return.

Why it is important to sort out your Self Assessment Tax Return as soon as possible

It is important to know your tax liability as soon as possible because you will not be able to consider any payment plans without it, whether you decide to delay with the 12 month Time to Pay extension or pay in January 2021.