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Are you struggling to pay your tax bill?

The last couple of years have been financially difficult for many and the coming year will bring increased costs – not least utility bills. The July 2022 payment on account tax bill needs to be paid in a few weeks’ time and some taxpayers may find it a struggle to do so. In addition, some may still be owing tax from 2020/21 and have found an additional 5% penalty added to their tax bill.

Self assessment – ‘Time to Pay’.

If you submit a personal tax return under self assessment and you know you will not make the 31 July payment then an application can be made to HMRC under what is termed a ‘Time to Pay’ arrangement. Such an arrangement is an agreement to pay the tax in instalments. For tax due under self assessment this can be set up online via the Government Gateway account if:

– tax return submissions are up to date (for current arrangements this will be the 2020/21 tax return)
– the tax bill is less than £30,000;
– the deadline for payment is within 60 days of the payment deadline (30 Sept 2022 for the 31 July 2022 payment); and
– it is intended to repay the debt over the next 12 months, or less.

Not eligible for ‘Time to Pay’?

If you are unable to set up a ‘Time to Pay’ arrangement online (e.g. because the tax you owe is more than £30,000 or relates to your 31 Jan 2022 or prior tax bill, or the liability is for another tax such as corporation tax or VAT), you may still be able to agree to an instalment payment plan but this needs to be by phone via HMRC’s Payment Support Service.

How much will each instalment be?

If you have any savings or assets, HMRC will expect these to be used/sold first and agree instalments to repay the remainder. The monthly payments will usually be set at approximately 50% of the money remaining each month after other bills have been paid. An ‘income and expenditure assessment’ form is used to record details and calculate the amount to pay.

What happens if I don’t keep to the agreement?

Once a ‘Time to Pay’ or other instalment agreement is in place, it must be adhered to. Defaulting on the agreement means that the arrangement will be cancelled, the tax will be payable immediately in full and enforcement action may be taken. If HMRC refuses to set up an arrangement for any reason (e.g. because you have defaulted in the past), you will be asked to pay what is owed in full.

Practical Point

HMRC understand that some taxpayers may find payment difficult but they can only understand if they are kept informed. If you cannot pay your tax bill in full or on time then please contact us and we will advise.

Further detail on the questions HMRC may ask under a ‘Time to Pay’ arrangement can be found here:

https://www.gov.uk/guidance/find-out-how-to-pay-a-debt-to-hmrc-with-a-time-to-pay-arrangement

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