Deferring VAT and Self Assessment Income Tax Payments
The Government will support businesses by deferring Valued Added Tax (VAT) payments for 3 months. If you’re self-employed, Income Tax payments due in July 2020 under the Self-Assessment system will be deferred to January 2021.
The guidance on how to pay VAT payments deferred between 20 March and 30 June 2020 has been updated with an added section on ‘Correcting errors on your VAT returns relating to the VAT payments deferral scheme’, including information on how to defer any extra payments resulting error corrections and HMRC VAT assessments.
If you deferred VAT between 20 March and 30 June 2020 and still have payments to make, you can:
- pay the deferred VAT in full on or before 31 March 2021.
- opt into the VAT deferral new payment scheme when it launches in 2021.
- contact HMRC if you need more help to pay.
The online opt in process will be available in early 2021 and you must do this yourself.
Instead of paying the full amount by the end of March 2021, you can make up to 11 smaller monthly instalments, interest free. All instalments must be paid by the end of March 2022.
The scheme will allow you to:
- pay your deferred VAT in instalments without adding interest.
- select the number of instalments from 2 to 11 equal monthly payments.
To use this scheme you must:
- still have deferred VAT to pay.
- be up to date with your VAT returns.
- opt in before the end of March 2021.
- pay the first instalment when you opt in
If you opt into the scheme, you can still have a time to pay arrangement for other HMRC debts and outstanding tax.
Self Assessment Income Tax
For Income Tax Self-Assessment, payments due on the 31 July 2020 will be deferred until the 31 January 2021
If you are self-employed you are eligible. This is an automatic offer with no applications required.
No penalties or interest for late payment will be charged in the deferral period.
HMRC have also scaled up their Time to Pay offer to all firms and individuals who are in temporary financial distress as a result of Covid-19 and have outstanding tax liabilities.
Monthly Payments for 2019-20
Self-Assessment customers can now apply online to HMRC to spread the cost of their tax bill into monthly payments without the need to call them.
The online self-serve ‘Time to Pay’ service, has been increased to £30,000 for Self-Assessment customers, to help ease any potential financial burden they may be experiencing due to the coronavirus pandemic.
Once you have completed your tax return for the 2019-20 tax year, you can use the online self-serve ‘Time to Pay’ service through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.
If you wish to set up your own self-serve ‘Time to Pay’, you must meet the following requirements:
• No outstanding tax returns
• No other tax debts
• No other HMRC payments set up
• your Self-Assessment tax bill is between £32 and £30,000
• It is no more than 60 days since the tax was due for payment.
If you do not meet these requirements, you might still qualify for Time to Pay, but you will need to call HMRC to set this up.
If you set up a ‘Time to Pay’ arrangement, you will have to pay interest on the tax paid late. Interest will be applied to any outstanding balance from 1 February 2021.