The January 31 tax deadline is looming. With tax debts piling up, some people are feeling overwhelmed. Don’t worry, you can defer payment of what you owe. HMRC’s Time to Pay system is the solution. Essentially, it allows you to pay tax in instalments.
What’s in your tax bill?
This quarter’s tax bill could be sizeable. Typically, you will pay NIC class 2 and 4 for 2019/20. Then there is Capital Gains Tax for 2019/20. There could be a balancing income tax payment for 2019/20. If you deferred your second 2019/20 income tax payment on account, you’ll pay it now. Finally, there’s the first income tax payment on account for 2020/21.
Pay tax in instalments
Essentially, Time to Pay allows you to pay tax in instalments. You will need to arrange a monthly direct debit. Remember, any tax paid late is subject to interest at 2.6%. This stands until the debt is cleared. Aim to pay all tax owed within 12 months.
Meet the conditions
As ever, use of the system is subject to conditions. You must have submitted your 2019/20 self-assessment tax return. There can be no earlier returns outstanding. The tax due must be at least £32. It can’t be more than £30,000. Don’t use Time to Pay if you have other tax instalment plans.
How to apply
Access Time to Pay via your Government Gateway account. You’ll need your user ID and password. Unfortunately, we cannot use this system on your behalf.
Reasons for rejection
Not all applications will succeed. It may be that HMRC has received but not processed your 2019/20 tax return. If so, the tax liability won’t show in your personal tax account. Sometimes HMRC will process a tax return manually. Typically, claims for the transferrable Marriage Allowance or Entrepreneurs’ Relief will trigger this. Unfortunately, it hinders processing of the return.
Tackling a Time to Pay rejection
What happens if the system says ‘no’? Quite simply, contact HMRC. Call the self-assessment payment helpline on 0300 200 3822. Talk through your circumstances. Negotiate a sensible plan to pay tax in instalments. We can help with this. Always use the helpline if you owe more than £30,000.
Keep information to hand
Always have key information to hand before calling. HMRC will need your UTR number or NI number. Explain how much tax you want to defer. Remember to advise details of any tax repayments you’re expecting.
Many taxpayers will also have VAT liabilities. VAT due in the period 20 March to 30 June 2020 and deferred must be paid by 31 March 2021. There is a way to delay payment. Find out more about HMRC’s VAT online deferral system.
Delaying NIC payments
We don’t recommend delaying payment of Class 2 NICs. Fail to pay by 31 January 2021 and you lose a complete year. Therefore, your NICs record will be one year short.
For advice on how to pay tax in instalments, call us on 01785 243276.
For more information and important advice for free see our expert questions answered.