News added on 31.01.2020

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Tax payments

HMRC softens time to pay arrangements

HMRC has published guidance on its time to pay arrangements, allowing some to pay their tax liability in instalments. What can you do if you’re struggling?

Tax bill. You’ve submitted your tax return on time and avoided a late filing penalty, but you must still find the money to pay your tax liability. The balancing payment of your 2018/19 tax liability is due today, along with a payment on account for the current tax year if applicable. HMRC has published guidance which clarifies the time to pay arrangements.

Who can use the scheme? Anybody with a debt to HMRC can ask to spread the costs with affordable monthly payments. You should contact HMRC as soon as possible to discuss your finances and agree a payment plan. The guidance confirms that HMRC won’t expect you to sell the family home or access your pension savings early in order to pay your tax bill. However, if you have other assets that can be realised such as investments or a second home, HMRC may ask you to sell them before agreeing to a payment plan. This was previously interpreted to mean that a person with assets would not be eligible for time to pay arrangements; the new guidance says HMRC takes its responsibility seriously to make sure that people who can pay do so on time, whilst providing extra, bespoke support to people facing financial hardship or in personal difficulty. This suggests a shift towards a softer, more productive approach to unaffordable debts.

Self- assessment debts. Individuals struggling to pay their personal tax bills can set up a payment plan online providing they:

  • owe £10,000 or less
  • have no other tax debts
  • have no other HMRC payment plans set up.

What about penalties? If a payment plan is agreed with HMRC then late payment penalties will not be charged from the time that the agreement is in place, provided you make the agreed payments. However, interest will be charged on any payment made after the deadline (3.25% per annum).

Tip. If your income has decreased, check whether you can reduce your payments on account for the current tax year.

HMRC’s guidance 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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