The deadline for online self-assessment tax returns for the 2019/20 tax year is 31 January 2021, but the tax and advisory firm says self-assessment taxpayers should file their return now.

One reason for this is to devise a strategy for meeting their tax debt.

Fiona Fernie, a tax dispute and resolution partner at Blick Rothenberg, said: “The deferral of the July 2020 payment on account means many people are facing a much higher bill in January 2021 than they would normally.

“Indeed, statistics show that the amounts of self-assessment payments received by HMRC in July 2020 totalled £4.8bn compared to £9.34bn in July 2019, suggesting that a significant number of taxpayers took the opportunity to defer their payment on account.

“It is therefore important that people know exactly what level of tax bill they now face and how they are going to meet them.”

If taxpayers submit their 2019/20 return before the December 2020 statements are issued by HMRC, these will show all payments due on 31 January 2021.

So taxpayers will know exactly what payments they owe before the 31 January 2021 payment date. These could include:

• deferred July 2020 payment on account (if it remains unpaid)
• any 2019 to 2020 balancing charge
• first 2020 to 2021 payment on account

If self-assessment taxpayers act now and contact HMRC, those who are unable to pay in full by 31 January 2021 can set up a Time to Pay (TTP) instalment arrangement. However, this will incur interest at 2.6%.

There is no obligation to declare that the taxpayer has been impacted by Covid19 to set up TTP. However, there are the following requirements:

• no outstanding tax returns
• no other tax debts
• no other HMRC TTP arrangements
• self-assessment tax bill is between £32 and £30,000
• it is no more than 60 days since the tax was due for payment

You can set up TTP online without having to contact HMRC directly. However, there is a delay of 48 hours following submission of a return before a TTP arrangement can be set up online.

Late payment penalties are charged when tax remains unpaid 30 days, six months and 12 months after its due date for payment.

These penalties can be avoided if a TTP arrangement is made before the tax becomes due, and all the tax owing under that arrangement is paid on time.

Kay Ingram, LEBC director of public policy, said: “This year there is more reason than ever to file your tax return early, as HMRC will enter a ‘time to pay’ arrangement with those taxpayers who file on time.

“This facility has been designed to help those adversely affected by the pandemic and gives them the option of spreading payments due in January over affordable instalments. Taxpayers who have overpaid may also be a due a refund, and this can be paid as soon as the return is filed and agreed.

“Filing your tax return in November gives HMRC the opportunity to assess any tax due before the 31st January deadline and has the added advantage of giving certainty to the taxpayer, who can assess whether they need to use ‘time to pay’.”

For those who may be accessing Universal Credit, establishing the tax due to be paid means that funds set aside for that purpose do not count towards the means test applied when eligibility for the benefit is assessed.