COVID-19: enhanced payment plans for Self-Assessment individuals

To help reduce any financial stresses as a result of the pandemic, HM Revenue & Customs (HMRC) has amended the instalment arrangements for paying tax liabilities for Self-Assessment taxpayers – increasing the threshold from £10,000 to £30,000.

From 1 October 2020, Self-Assessment individuals can apply for additional support to spread the cost of their tax liabilities through monthly payments and do not need to call HMRC to do so. Instead, they can use the Time to Pay online payment service.

Initially, through this self-serve process, Self-Assessment individuals could set up monthly instalment arrangements to pay their owed tax, but there was a maximum threshold of £10,000. Now, this threshold has increased to £30,000.

This rise is following on from the Chancellor of the Exchequer’s announcement about providing additional support for businesses and individuals throughout the unpredictable months ahead.

Self-Assessment individuals can pay their deferred payments on their account bill (from July 2020), or any outstanding tax owed for 2019 to 2020, plus their first payment on their account bill for this current tax year in monthly instalments, through the self-serve tool.

However, if an individual needs longer than 12 months to settle their tax liabilities, they must contact HMRC the usual way.

On estimate, 95 per cent of Self-Assessment individuals, who have payments due on 31 January 2021, could utilise this service without the need to contact an HMRC adviser, provided they meet the following criteria:

  • Have no outstanding tax returns
  • Have no other tax debts
  • Have no other HMRC payment plans set up
  • The debt needs to be between £32 and £30,000
  • The payment plan needs setting up no later than 60 days after the due date of a debt

All individuals using Time to Pay must pay any interest on the tax owed on any outstanding balance from 1 February 2021.

Financial Secretary to the Treasury, Jesse Norman, states the Government are “supporting jobs by giving more breathing space to up to 11 million Self-Assessment taxpayers when managing their tax affairs.

“Enhancing Time to Pay should ease the financial burdens, and protect the livelihoods of these taxpayers, as they navigate the months ahead.”

For more information or help regarding Self-Assessment tax obligations, contact our expert team today.