Income Tax payments on account deferral – FAQs

1. Am I eligible?

Every taxpayer in self-assessment with a payment on account due by 31 July 2020 is eligible, regardless if they are self-employed or not.

2. How do I apply?

The deferral of the payment is automatic so a claim is not required, and no interest will be charged if the payment is made by 31 January 2021.

3. Can I pay by 31 July 2020 if I wanted to?

The deferment is optional and if you wanted to make your payment by the original due date of 31 July 2020 you can do so.  However, as the payment doesn’t need to be made until January 2021, and no interest will be charged for deferring the payment, there’s no reason to make it sooner if you think delaying making the payment will help you deal with the financial impacts of Covid-19.

4. Will I be classed as a late payer by HMRC?

No, the due date has officially been changed to the later date of January 2021 and HMRC have confirmed they will not charge interest or penalties if the payment is made by 31 January 2021.

5. How much is due to be paid by 31 January 2021?

Unless you have made a claim to reduce your payments, the second 2019/20 payment on account is calculated as half of your 2018/19 tax liability.  The first payment was due in January 2020 and the second due July 2020, now deferred to January 2021.

The payments on account are interim payments towards your actual 2019/20 tax liability, any additional tax due on top of the interim payments is usually calculated when you file your tax return before the filing deadline of 31 January 2021.  Similarly, any refund due, if the interim payments on account are greater than your actual tax liability, is refunded.

Therefore, you have the opportunity to file your tax return before your second payment on account is due, and understand your actual tax liability, meaning your second payment on account may be lower than originally calculated, or not due at all.  So it is important to finalise your tax return as soon as you can to understand what Income Tax payments are due in January 2021.

6. Does deferral mean the payment is not due?

No, deferral of the payment simply means the deadline to make the payment has been moved.  The measure is designed to help individuals, particularly the self-employed, deal with the financial strain of Covid-19.  Therefore, it is sensible to plan for the payments due albeit you have longer to plan for them.

7. I don’t have a payment on account due but will struggle to pay my future tax liabilities, can they be deferred?

The payment on account deferral was introduced to help self-employed individuals cope with the next few months.  If you do not have payments on account to make, or you think you won’t be able to make tax payments, HMRC have set up a helpline to discuss making a time to pay arrangement with them.  The number to call is 0800 024 1222.

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