Income tax and VAT payments due in the summer of 2020 were both deferred automatically until 2021, with no interest or late payment penalties due. In both cases the taxpayer could pay the tax or VAT by the original due date if they wished to.
As a result of this deferral individual taxpayers will have the following amounts of tax due for payment by 31 January 2021:
- a) Second payment on account 2019/20
- b) Balancing payment 2019/20
- c) Capital gains tax 2019/20 (if not paid under 30-day rule)
- d) First payment on account 2020/21
It appears from the Chancellor’s statement that the taxpayer will be able to apply to defer items a) and d) in this list by spreading the payments over 12 monthly instalments to January 2022.
Where the total tax due doesn’t exceed £30,000 the application to spread these tax payments will be agreed automatically when the taxpayer applies using an online form. If the total tax due exceeds £30,000, or the taxpayer needs longer to pay, the taxpayer will be able to call HMRC to agree a bespoke payment plan.
Where a business deferred VAT due in the period from 20 March to 30 June 2020, that VAT will be payable by 31 March 2021. The business will now be able apply to spread the deferred VAT payment over 11 equal instalments payable between April 2021 and March 2022. This deferred VAT will not be subject to interest if the payments are made as agreed.
Finally, the reduced 5% rate of VAT for the hospitality and tourist sector was due to revert to 20% on 13 January 2021. The Chancellor has decided to extend this period of 5% VAT up to and including 31 March 2021. This will make accounting for the reduced rate far easier as the VAT rate will change at the beginning of a month.