Support for Paying Self-Assessment Tax Bills

January can be a taxing time for many people… especially if you have a hefty tax bill to pay by the end of the month.

According to HMRC, more than 42,500 customers chose to see in the new year by submitting their return on 31 December or 1 January, however, after a very challenging few years which has seen events around the world wreak havoc on many businesses, lots of people might understandably be struggling to pay their Self-Assessment tax bill with the deadline looming on January 31. The number of people filing their tax returns over the Christmas period was down almost 30 per cent versus last year, and HMRC’s warning that there are 5.7million people still yet to file their returns should be a wake-up call to many that they need to take prompt action.

With this in mind, we are offering advice on how to ease your tax burden – and the pressure that comes with paying it.

How to pay your tax bill

There are a number of ways to pay your tax bill but you need to be careful that you take into account the number of days for your transaction to go through.

For same or next day transactions, taxpayers can pay via their online or telephone banking account, CHAPS, debit or corporate credit card online, or at their bank or building society (for which you’ll require a paying-in slip from HMRC).

You need to allow three working days for payments made by cheque, BACS or a pre-existing direct debit (allow five days if setting up a new one).

A further word of caution from Exchange’s Melanie Peebles:

“Remember that if the deadline falls on a bank holiday or weekend, you need to have your return submitted and paid by the last working day before the deadline,” warned Melanie.  “And try not to leave it to the last minute when making online payments as the system could be very slow due to the service being exceptionally busy at these times.”

It is very common to put off the dreaded task of calculating your tax liability – the collective sigh breathed across the nation in January when it comes to tax returns is felt every year. Last year, 630,000 tax returns were filed on the normal deadline day of 31 January 2022 but the waiving of penalties for late filing had already been announced by then.

There don’t appear to be any plans to waive penalties this year and the deadline day filers could easily exceed 1million.

It is also important to note that leaving filing your tax return until the last-minute means that valuable reliefs for pension contributions or charitable donations can be missed.

If you’re struggling to pay your tax bill

If you are struggling to pay your tax bill by the deadline, you can apply online via HMRC’s website to make a ‘Time To Pay’ (TTP) arrangement to spread your repayments over up to 12 months.

In order to avail of this support, taxpayers must have submitted their tax return, owe less than £30k and be within 60 days of the original payment deadline (i.e., before April 1 for tax due on January 31).  You must have no other HMRC payment plans set up, and no other tax debts or outstanding tax returns.

If you meet these criteria, you can apply online to set up a direct debit and pay your tax bill over a period of up to 12 months – without having to discuss it with HMRC and without having to provide details of current income and expenditure.

Taxpayers should wait three days after filing their tax return to set up an online TTP arrangement – which can only be set up directly by the taxpayer and not by any associated representative.

In setting up a TTP arrangement, you will be asked if you want to pay a lump sum up front, how much you can afford to pay in instalments and over what period of time.

Interest will be accrued at the HMRC late payment interest rate (currently 2.6% APR) for all tax outstanding from the original due date until the debt is cleared. Late payment penalties will be avoided, provided you don’t break your TTP agreement.

For debts of more than £30k or which need longer than 12 months to pay, taxpayers should call the Self-Assessment Payment Helpline on 0300 200 3822. More information is available on www.gov.uk/difficulties-paying-hmrc/pay-in-instalments.

Our Top Tax Tips

• Don’t miss the deadline: Unlike last year, there has been no announcement to indicate that HMRC will grant any extension to give people extra time to file their tax return and pay any tax due. Make sure that you submit your return on time and either pay your tax bill or set up a TTP arrangement with HMRC if you are struggling to pay the full amount. Remember, HMRC wants to help you pay your tax bill – so don’t simply avoid or ignore it as that could prove very costly.

• Think ahead – and budget accordingly: Speak early to your accountant, ascertain how much your tax bill is likely to be, and set aside a portion of your income every month to ensure that you can afford to pay when the deadline arrives.

• Online is easier: Filing your tax return online means that you don’t have to do everything at once.  You can upload some of the information you need, save your form and return to it later at a time that suits.

• Steady as you go: Try to keep accurate records of your income and expenses as you go along through the year – so you don’t have to go through it all at the last minute. Use online accounting software, such as Xero, or create a spreadsheet to record all of your invoices, bills, payments and expenses.  HMRC can request to see records dating back six years – so make sure you keep them for at least that length of time.

• It’s good to talk!: Find yourself a good accountant to advise you on any areas of doubt and to help make sure that your tax return is submitted correctly and on time.

Late tax returns: What are the penalties?

The penalties for late tax returns involve an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time.

After three months, additional daily penalties of £10 per day, up to a maximum of £900 will be added.

Then after six months, a further penalty of whichever is greater out of 5 per cent of the tax due or £300 will begin being charged. After one year, another 5 per cent or £300 charge will be added.

Those paying late will also be hit with higher interest charges this year. The late payment interest rate is set to rise to 6 per cent on unpaid taxes from 6 January 2023, the highest rate since November 2008. Taxpayers in arrears should be aware of this.

For more information on Exchange’s  digital accountancy services and self-assessment tax support, click on www.exchangeaccountants.com, call 028 9263 4135 or send an email to info@exchangeaccountants.com.