Spreading your January self-assessment payment

Worried about paying your self-assessment tax bill? We’ll review your financial situation and advise you on whether you meet the criteria for a time-to-pay arrangement with HMRC.

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Spreading your January self-assessment payment
Spreading your January self assessment payment Accountant Kings Lynn

As we start to recover from the worst effects of the Covid 19 Pandemic, many owners, directors and self-employed individuals remain concerned about having enough funds to pay their self-assessment income tax bill.

The good news is that HM Revenue & Customs (HMRC) does have a facility for spreading out your income tax payments. HMRC’s ‘time-to-pay’ arrangement allows you to pay your tax bill in pre-agreed installments, with a small amount of interest added on for the use of this service.

How does the time-to-pay scheme work?

The time-to-pay scheme relates to HMRC’s online payment plan service, allowing you to come to an agreement about deferring your tax bill and spreading the costs over several months.

The amount that you can spread will include the balance of your 2020/21 tax and the payments on account towards the 2021/22 tax bill. Some other considerations of the facility include:

  • Interest will be charged from 1st Feb 2022 – currently at 2.6% p.a.
  • You need to choose how much to pay initially and how much you will then pay monthly.
  • If a payment is missed, the whole amount can be demanded by HMRC.
  • If an arrangement is set up, this avoids any enforcement action to collect your due taxes, ie. calling in debt collectors, etc.

How to check if you’re eligible for online payments

So, how do you know if you’re eligible to set up a time-to-pay agreement with HMRC? There are five criteria that must be met for HMRC to consider an online payment arrangement.

The five criteria are:

  1. The amount due must be between £32 and £30,000.
  2. There must be NO outstanding tax returns to submit
  3. There must be NO other tax debts
  4. There must be NO other active HMRC payment plans
  5. The length of the payment plan must not exceed 12 months

The deadline to set up online payments is within 60 days of the due date – in this case, 1st April 2022 for the current tax year and the first payment on account for the coming tax year.

If you don’t qualify based on the five rules mentioned above, you can still apply for normal (not online) time-to-pay arrangements. It’s worth noting that time-to-pay arrangements don’t show up in credit searches – but if it ends up with an Individual Voluntary Agreement (IVA) or County Court Judgement (CCJ) being made, that will obviously show up.

Your filing and payment deadlines for Q4 2021 | King's Lynn Accountant Thain Wildbur

Talk to HMRC about agreeing a time-to-pay arrangement

If you’re concerned about not being able to pay your January self-assessment income tax bill, you can contact HMRC to discuss this. They are likely to ask questions about your financial situation and available funds, to determine how much you can realistically afford to pay. You can find additional information at https://www.gov.uk/guidance/find-out-how-to-pay-a-debt-to-hmrc-with-a-time-to-pay-arrangement

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