self assessment tax returns

Self-Assessment Customers in the UK to get the advantage of Enhanced Payment Plans

Another ray of light amidst the darkness that persists in the UK and across the world due to COVID-19 was the declaration of Enhanced Payment Plans for Self-Assessment Customers. The Chancellor, Mr. Sunak, had made a declaration for taxpayers’ payment plans in the country in September as part of his speech.

Avail of the benefit of increased threshold

The due date to make payment for the taxes due on account of the income for the year 2019-2020 is almost around the corner. Hence, all the taxpayers must understand the benefits available to them as per the scheme for Enhanced Payment Plan. The government hiked the threshold limit for the tax obligation to £30,000 under the plan. Thus, if you have a tax liability up to the threshold declared and unable to pay it by 31st January 2021, you can use the self-serve “Time to Pay" arrangement. A lot many taxpayers perceive the declaration as a positive move. This increase in the limit has been in effect from the beginning of October 2020.

Millions of Self-Assessment Taxpayers in the UK to Get Relief

Each year, there are more than ten million citizens who file self-assessment income tax returns in the UK. In the year 2020, many of these taxpayers are undergoing a financial crunch induced by the COVID-19 scenario. Thus, they may find it difficult to pay their entire tax obligation at once. However, it is important to understand that not all self-assessment taxpayers are eligible to avail of the instalment scheme as per the Enhanced Payment Plan. Still, the HMRC has stated that it anticipates that more than 90 percent of the self-assessment taxpayers will be able to use the “Time to Pay" facility’s benefit due to the extra limit available with the Enhanced Payment Plan.

Time to Pay Facility with Enhanced Payment Plan

The tax payments that are payable to the HMRC in July 2020 or the upcoming January 2021 due to the deferment option availed for the year 2019-2020 can be settled in instalments. Once you file your self-assessment tax return a self-assessment bill is generated. All taxpayers need to pay the tax obligation stated in this bill. Now, with the scheme to help individuals and small businesses, the HMRC has offered the instalment arrangement.

The instalment system can go for a maximum period of 12 months. The payment can be made in monthly instalment. The assistance is available as per the “Time to Pay" arrangement to certain self-assessment taxpayers.

Eligible self-assessment taxpayers can opt for the “Time to Pay" arrangement as per their convenience. If they have sufficient finances to meet your self-assessment tax liability, you can make lump-sum regular tax payments as per the deadline.

Conditions for Eligibility for the Time to Pay Facility

A self-assessment taxpayer can use the Time to Pay facility to distribute his overall tax liability for the tax year 2019-2020 if he meets the below-enlisted conditions.

  • All the tax returns of the taxpayer are duly filed with the HMRC so far
  • The taxpayer must file his self-assessment tax return for the year 2019-2020 before the due date for payment on 31st January 2021. Thus, the HMRC must be aware of the taxpayer’s overall tax obligation for the preceding tax year 2019-2020. A person will not be eligible for the scheme if he has not filed his returns in a timely manner before the deadline of 31st January.
  • The total tax liability should not exceed £30,000. Hence, the due tax amount must fall in the range of £32 to £30,000.
  • The taxpayer should not have availed of any alternate payment plan from the HMRC
  • The taxpayer shall not be eligible for the arrangement if he already owes any debts to the HMRC.
  • Not more than 60 days have passed since the tax liability was due to the HMRC.

Interest on Instalments under the “Time to Pay" facility

Under the “time to pay" facility, one does not have to pay any interest or penalty in the form of late fees during the period of deferment. Thus, up to 31st January 2021, the self-assessment taxpayers are not liable to pay interest if they fulfil they meet their instalments date on time.

However, self-assessment taxpayers need to pay interest on their outstanding tax liabilities paid in monthly instalment from February 2021. On late payment of instalments under the “Time to Pay" scheme, self-assessment taxpayers are liable for 2.6 percent interest. If you miss any of your instalments, it is advised you contact the HMRC payment support service.

Process to set-up your self-service “Time to Pay" facility

In order to set up your time to pay facility, you need to use your online HMRC gateway account. One needs to login using the necessary credentials. Then he needs to go to the Direct Debit Section and choose the budget payment option while filling up the Direct Debit Form.

If you find any issue in setting up the time to pay arrangement, you can call the HM Revenue and Customs support team.

Option to make regular tax payment on an advance-basis

The HMRC has provided another choice to taxpayers who want to park aside a fixed sum of money to cover their tax payments under the self-assessment tax bill. This option is also called the budget payment plan. As per this option, you have the freedom to decide how you will pay your tax liability to the HMRC on a weekly or monthly basis. It allows you to stop payment for a maximum period of 6 months.

However, in order to make use of this tax payment option, you need to ensure that all the self-assessment tax bills for the preceding tax years are duly settled. One should also not confuse this option with the payments on account option.

All self-assessment taxpayers must also remain cautious about fraud schemes. Scammers may contact you impersonating the HMRC authorities with the motive to extract money from you illicitly. Always correspond with the official HMRC website and contact details.

Better times are awaiting!

Many taxpayers stand to gain a better standing to revive their business with the backing of relief measures such as the Time to Pay facility and the Enhanced Payment Plans. As the COVID-19 situation will improve, the taxpayers can hope to get back on track with the government’s support.

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