Tax cashflow: your next steps

The Winter Economy Plan gives longer to pay for liabilities due in January 2021.

Income tax

This applies not just if you took up the option of putting off to 31 January 2021 the second income tax self assessment payment on account for 2019/20, due by 31 July 2020, but also to payment of other amounts due by 31 January 2021: the balancing payment for the 2019/20 tax year and first payment on account for 2020/21. The Plan allows an additional period to pay of up to 12 months to those who need it, moving the deadline to January 2022.

If you have self assessment tax debt up to £30,000, you can take advantage of this by setting up a payment plan online without needing to phone HMRC, and you should get automatic, immediate approval. For larger debts, or to arrange longer to pay, contact HMRC’s helpline to set up a Time to Pay arrangement: https://bit.ly/3cu9qPa. Alternatively, if you are able to, you can pay in full or in instalments on or before 31 January 2021, via the usual online service.

VAT

The VAT deferral period ended on 30 June 2020, and as far as ongoing liabilities are concerned, it’s business as usual. It was originally announced that any VAT payments deferred between 20 March 2020 and 30 June 2020 should be paid in full on or before 31 March 2021. The Winter Economy Plan changed the rules, giving extra time to pay. The VAT deferral ‘New Payment Scheme’ allows payment in 11 equal interest-free instalments in the 12 months to 31 March 2022. You will need to opt-in to do this, and HMRC will provide a means of doing so early in 2021: Deferral of VAT Payments due to COVID 19. If you prefer, you can still pay in full or make payments towards the deferred VAT at any point before 31 March 2021. HMRC has advice on how to do this: Pay VAT.

Further help

HMRC’s Time to Pay service is available to any business struggling to pay tax on time: Difficulties Paying HMRC. You may also find information on the TaxAid website helpful: Dealing with Tax Debt, although the charity is only resourced to help those on yearly incomes of £20,000 or less. We are happy to discuss other possibilities with you. If, for example, taxable income for 2020/21 has fallen in comparison with 2019/20, it may be possible to reduce your 2020/21 payments on account, rather than use the monthly payment facility.

Please do contact us for advice.