If the amount of tax you have to pay for Self Assessment is making your heart race, you should definitely consider the Time to Pay system. The UK has made it possible for taxpayers to spread their tax payments over up to 12 instalments! Check that you meet all the requirements to take advantage of this and see if you can defer your Self Assessment tax payment.
What is Self Assessment Tax?
Before we look at how you can delay paying your tax through Self Assessment, it’s worth remembering some general information about it, which is used to determine the amount you owe HMRC. Those required to file a Self Assessment tax return include individuals who
- were self-employed,
- were registered as company directors,
- earned income from sources outside the UK,
- received dividends from shares.
The UK tax year runs from 6 April of the current year to 5 April of the next year.
Penalties for Late Self Assessment Tax Payments
In the UK, missing deadlines can have serious financial consequences. If you’re even one minute late paying your tax, you’ll automatically be charged a penalty of £100!
Importantly, HMRC is not concerned with the date you make the payment, but when the money is received in their account.
Here’s what you’ll pay for missing the Self Assessment tax deadline:
- £100 – initial penalty for any delay,
- after 3 months, £10 for each day (up to a maximum of £900),
- after 6 months, 5% of the tax due or £300,
- after one year, another 5% of the tax due or £300.
Time to Pay
From 1 October 2020, you will be able to apply to spread your Self Assessment tax payments into monthly instalments without having to contact HM Revenue and Customs (HMRC) by telephone. The formalities will be completed online as part of the improved Time to Pay process. To qualify for this scheme, you must meet the following requirements:
- 80% or more of the tax due for the period has been paid,
- your tax return has been filed on time,
- you have no outstanding tax liabilities,
- the remaining tax to be paid is no more than £2,999.99.
You must set up the payment plan no later than 60 days after the payment due date.
HMRC will collect an increased amount from you over a 12-month period, starting from 6 April.
However, you must act quickly – submit your tax return at least one week before 31 December to give the tax office time to check your return.
If you need to spread payments over more than 12 months, you must contact HMRC directly.
