The amount of tax payable by an individual taxpayer by 31 January 2021 will be made up of the following amounts:
- Balancing income tax payment for 2019/20
- Second income tax payment on account for 2019/20 – deferred from July 2020
- First income tax payment on account for 2020/21
- Capital gains tax for 2019/20
- Classes 2 and 4 NIC for 2019/20
Where the total of this tax liability is no more than £30,000, and the taxpayer cannot pay it all in one go, they can apply to set up a payment plan online through their Government Gateway.
The taxpayer can choose how many instalments they need to spread their tax bill on a weekly or monthly basis within 2021. But all the late paid tax will accrue interest at 2.6% until it is paid.
The online application for time to pay should be automatically granted as long as the taxpayer is already up to date with all other tax payments, but some taxpayers are finding their request is being rejected by the HMRC computer. In this case the taxpayer, or us as your agent, will have to call the HMRC payment support service (open 8am to 4pm on weekdays) to talk to a HMRC officer in order to agree a payment plan.
Before we reach that stage, we need to examine the level of payment on account for 2002/21 to check whether it is a reasonable amount in view of the expected profits for that year. Remember any SEISS grants received will be counted as trading income for 2020/21, so they need to be taken into account.
Finally, be careful when postponing class 2 NIC due for 2019/20, as if that is not paid by 31 January 2021, the tax year will not count as a completed year in the taxpayer’s NIC record.Written by the Tax Advice Network