Time to pay

Here’s All you Need to Know About HMRC Time to Pay Scheme 

02/02/2021Payroll & PAYE , Tax Issues

The Corona Virus Support Package allowed many people to defer payments of July 2020 income tax payments. They were supposed to pay these instalments by 31st January 2021. As of now, HMRC understands that due to the current economic situation, so many people are still holding off on the payments that would have been due on 31st January 2021. These include: 

  • The balancing income tax payment for 2019/20,
  • The first income tax payment on account for 2020/21,
  • Any capital gains tax for 2019/20 and
  • Classes 2 and 4 NIC for 2019/20.

HMRC has identified another method. This is applicable for further deferment. This one is called ‘time to pay’ arrangements facility and can be availed online. Taxpayers that find it hard to pay on time may end up discussing their payment plans with HMRC representatives. This online system makes the whole process ten times more easier. 

The taxpayer needs to pay a government gateway account. They need to pay the tax in monthly instalments by direct debit. This is done to stay clear of direct debit within 12 months. Take a look at other conditions of time to pay scheme: 

  • You must have paid the 2019/2020 tax return
  • If you’ve made any submissions, all the records must be up to date. 
  • The range of debt must be at least £32 but less than £30,000.
  • Make sure there are no other installment plans in place. 

The good new is: the system is flexible too. Under normal circumstances, you’re required to pay on monthly basis. It’s total upto the tax payer to make additional payments too as per their liking, if the circumstances are favourable for them. If you’re starting out on the instalment plan, make sure its done no later than 60 days after the due date of the tax. Realistically, it needs to be in place by 31st March 2021. In case, you’re late, an interest of 2.6% will be applied to the full date of repayment. 

The facility may be a lifeline for many but it should be noted that care needs to be taken should the application include deferment of Class 2 NIC due for 2019/20. The rules covering NIC payments mean that if this NIC is not paid by 31 January 2021, then the year will not count as a completed year in the taxpayer’s NIC record for state pension purposes.