Meg Saksida outlines the help available to taxpayers with difficulties meeting their self-assessment liabilities on time.
It has been a tough couple of years for most taxpayers. When January comes around, it can be overwhelming to find, hot on the heels of Christmas and in addition to all the normal monthly expenses, self-assessment tax becoming due.
What if you simply don’t have the money to pay your tax bill?
The due date for payment of self-assessment tax is usually 31 January the year after the tax year the income was earned. In the tax year 2020/21 the deadline was, therefore, 31 January 2022.
However, as a nod to the financial crisis many taxpayers have found themselves in due to the ongoing pandemic, HMRC announced that payment and submission of the self-assessment forms could be delayed to the end of February without a penalty (although interest would still be calculated on any unpaid amounts due, as the due date remains 31 January 2022).
Taking steps
If appropriate, HMRC may offer a ‘time to pay’ (TTP) arrangement. This is generally offered automatically (and can be done online) by those taxpayers who have diligently filed their last tax return, owe less than £30,000, and are still within two months (60 days) of the deadline by which they were to pay the tax (NB this remains 31 January 2022 for the tax year 2020/21). Finally, the taxpayer must have the capacity to pay all the tax outstanding within the following year or less.
Taxpayers will need their unique tax reference number, bank account number and details of any prior tax payments made. An idea of how much the taxpayer can afford to pay will be requested and this, coupled with the taxpayer’s monthly income, savings and outgoings, will allow the program to calculate an appropriate payment schedule. The amount of the payment due under the TTP usually works out as around half of what the taxpayer has left at the end of the month after all their outgoings.
If the taxpayer does not fall into the above category (e.g., they need longer than a year to pay the tax due, or they had not submitted their previous year’s self-assessment tax return), a decision on whether a TTP arrangement can be entered into will be made on a case-by-case basis.
HMRC states: “there is no time limit on how long a [TTP] arrangement can last”, so the best thing is to be honest and open about how much the taxpayer can afford to pay.
Is anyone prevented from setting up a TTP?
If a taxpayer has never paid any taxes to HMRC, or HMRC has reason to believe that the taxpayer will not follow the payment schedule set out in a TTP, they will be ineligible to enter into one.
Without a TTP, the taxpayer will need to pay the tax over by the due date and, failing that, HMRC could either collect the tax through a debt collection agency, directly from salary payments (if the liability was as a result of a county court judgement), repossession of the taxpayer’s assets, or by taking the tax owed directly from the taxpayer’s bank account.
HMRC may also make the taxpayer bankrupt and the cost of this plus other expenses, such as auction fees on the selling of the taxpayer’s assets, will be added to the outstanding tax due.
Practical tip
The first step is to contact HMRC and be honest and up-front about the inability to pay. A genuine temporary cashflow problem can be aided by the TTP but a refusal to pay the tax for other reasons will not be.
