27.1.2021 | taxSelf-assessment tax bill how to spread the cost
Time is running out to submit your self-assessment tax returns – with the usual deadline of January 31 fast approaching.
However, the Government has now scrapped penalties for those submitted by February 28 – essentially giving people an extra month before getting hit by a fine.
But don’t delay – the tax will still be due, so interest will continue to be charged on tax not settled by the January deadline.
Many people will find the payment is much larger than usual, as it is taxing the profits for the year to April 5, 2020 – most of which was before the pandemic struck.
As the treasury deferred the July 31, 2020, tax payment, it has reintroduced the time to pay provisions, allowing payments due on January 31, 2021, to be spread over the course of the tax year.
Here, Andrew Diver, Head of Taxation at Beatons Group, explains how to navigate the process.
How to set up a payment plan
HMRC is encouraging taxpayers to apply online – and the easiest way to set up a payment plan is through an individual government gateway account.
Through the account, taxpayers can also apply for self-employment support grants, submit residential property capital gain returns and review their state pension plan forecast.
How to set up a gateway account
You can sign up to a gateway account here https://www.access.service.gov.uk/login/signin/creds
Once you have entered your email address, a code will be sent to verify you have access.
You will then need to select ‘individual’ and will be asked to prove your identity using either a passport, a P60 or payslips.
If you do not have these documents, you will have to pass other credit agency checks, which may include having details of standing order payments at hand.
Once you have the gateway account set up, you can complete your online payment plan here https://www.gov.uk/difficulties-paying-hmrc
Reducing tax on payments
Many people face not only an increasing balance payment but are required to make tax payments on accounts for the year to April 5, 2021.
The default position is that payments for the 2020/21 tax year, payable on 31 January 2021, are based on half of the liability for 2019/20.
However, if you believe your tax liability will be lower for the 2020/21 tax year – and for many, it will be due to the pandemic – then it is possible to reduce your tax payment payable in January to half of your actual tax liability for 2020/21.
For the self-employed, they should include any self-employment income support scheme grant payments during the year to April 5, 2021, as this is all taxable income.
If you have any further questions regarding tax payments visit beatons.co.uk