In a month when people may already be struggling to pay their Christmas credit card bills, the prospect of finding more money to pay a self assessment tax liability may be daunting. But however unpalatable the 31 January tax deadline is, it is not one that should be ignored.
Taxpayers who are within self assessment will need to pay any remaining income and capital gains tax due for the year ended 5 April 2021 by 31 January 2022, and also any Class 4 and Class 2 National Insurance liabilities for that year. In addition, they may also be required to make their first payment on account towards this year’s income tax liability.
If you are struggling to pay what you owe, what can you do?
First and foremost – contact HMRC
Ignoring the problem will not make it go away. It will make it worse.
If you think that you are going to struggle to pay what you owe in full by the 31 January 2022 deadline, you should set up a ‘time to pay agreement’ with HMRC or at the very least contact HMRC as soon as possible and, ideally, before 31 January 2022.
If you miss this deadline, however, all is not lost, and you may still be able to set up or agree an instalment plan.
Paying tax in instalments
It may be possible for you to pay what you owe in instalments by setting up a ‘time-to-pay agreement’ with HMRC.
You can do this yourself online via your Government Gateway account if:
- you have filed your latest self-assessment tax return;
- you owe less than £30,000;
- you are within 60 days of the payment deadline; and
- you plan to pay back what you owe within the next 12 months.
If you do not meet all of the above conditions, you will not be able to set up an instalment payment plan online but you may still be able to agree one with HMRC. To do this, you will need to call the self assessment payment helpline on 0300 200 3822. The line is open from Monday to Friday from 8am to 4pm and, when making the call, make sure you have the following information to hand:
- your unique taxpayer reference and National Insurance number;
- your VAT registration number if you are VAT-registered;
- your bank account details; and
- details of any previous tax payments that you have missed.
HMRC will consider what you are able to pay in full, your monthly income and outgoings, any savings and investments that you have and what you can afford to pay each month. If you have savings or investments, you will be expected to use these to clear your tax bill.
There is no set length for a time-to-pay agreement. It will depend on how much you can afford to pay each month to clear the tax that you owe. The payments are usually made by direct debit and, once the agreement is in place, it is important that payments are not missed and that future liabilities are paid on time.
If you do not make the payments, or if HMRC will not agree to a time-to-pay agreement, you will be expected to pay what you owe in full. HMRC may use their debt collection powers if you do not do this. If you find yourself in this position, please do not hesitate to contact us for advice and guidance.
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