Should you pay your tax bill in instalments?
Figures from HMRC show that Brits have used the online Time to Pay service to pay more than £310m worth of tax in instalments since April last year.
Workers on self-assessment can use Time to Pay to spread the cost of tax bills of up to £30,000 over 12 months, if they’re unable to pay in full. This can be done online at Gov.UK without speaking to HMRC.
If someone owes more than £30,000, or needs longer to pay, they should contact HMRC to discuss their payment options.
The deadline for filing tax returns, paying any tax owed or setting up a payment plan was 31 January but, this year, HMRC has given customers extra time to meet their obligations without facing penalties.
This means anyone who didn’t file their return by the 31 January deadline will not receive a late filing penalty if they file by 28 February. Also, anyone who didn’t pay their tax liabilities by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time To Pay arrangement, by 1 April.
However, from 1 February, all outstanding amounts were subject to interest. The interest rate will go up from 2.75% to 3% from 21 February after the base rate rise earlier this month.
Myrtle Lloyd, HMRC’s director general for customer services, said: “We understand some customers might be worrying about paying their self-assessment bill this year, and we want to support them. To see if you’re eligible to set up a payment plan, go to Gov.UK and search ‘pay my self assessment’.”
The 2020/21 tax return covers earnings and payments during the pandemic.
Taxpayers need to declare if they received any grants or payments from the Covid-19 support schemes up to 5 April 2021 on their tax return, as these are taxable.
Grants or payments that need to be declared include Self-Employment Income Support Scheme (SEISS) grants, payments from the Coronavirus Job Retention Scheme, and other Covid-19 payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme.
However, the £500 one-off payment for working households receiving tax credits should does not need to be included on tax returns.