Deferring Tax Due in January

Many people are going to face sizeable tax bills in January 2021 as the balance of income tax due for 2019 -20 on profits earned before the pandemic is due for payment.  In a bid to help business owners, income tax payable by 31st July 2020 was automatically deferred to 31st January 2021, making the January 2021 bill even bigger. Any capital gains tax for 2019-20 is also payable by the same date.

Take some time to look over your books. If you think you will struggle to pay your tax due in January, you can apply for ‘time to pay’ to spread the balance over 12 monthly instalments. You can apply online in advance or within 60 days of the tax becoming due. The government will always try to work with you to negotiate time to pay based on your income and expenditure. Time to pay arrangements are based on an individual’s specific financial circumstances, so there is no ‘standard’ time to pay arrangement. They will establish your ability to pay using an ‘income and expenditure’ assessment. This looks at your income, disposable assets and expenditure to calculate your disposable income.

HMRC typically expects you to pay no more than 50% of your disposable income. This may be higher if you have a very high disposable income. There’s no upper limit on the amount of time that someone can have to pay. A time to pay arrangement can cover all outstanding amounts overdue including penalties and interest. Find out how to pay a debt to HMRC with a time to pay arrangement here.   Your request for ‘time to pay’ should be granted automatically if you do not have other debts and the amount you owe is no more than £30,000.

The VAT payable in the period from 20th March to 30th June 2020 was also automatically deferred to 31st March 2021. You can settle this debt in part or in full before 31st March 2021 but if the VAT due is still outstanding by that date you will be able to opt into a new payment scheme to pay off the debt over 11 instalments. You will be charged interest on the outstanding tax from the date it was deferred until it is paid in full.

Should you require any further information regarding deferral payments, please contact us on 02085300720 or email