Even some of the most organised people may find that they struggle to pay their Self Assessment tax bill on time – with an increased cost of living, high inflation and high energy costs, it’s understandable that some people may struggle to find the money to cover the charges.
There is an option to make a payment arrangement with HMRC if you know you’re going to struggle to pay your Self Assessment bill on time.
What happens if I don’t pay on time?
If you miss the 31 January deadline, you’ll need to pay a penalty, and may need to pay interest on any tax due.
The current penalty is £100 – and the interest rates are linked to the Bank of England base rate plus 2.5% for late payments, and a repayment interest rate which is the base rate minus 1% (to a minimum of 0.5% if base rate is too low).
You can estimate the penalties and charges on HMRC’s website.
HMRC Time To Pay Scheme
If you know you’re not going to be able to pay your bill by the deadline, you should let HMRC know as soon as possible to setup a Time To Pay arrangement.
This is where HMRC will work with you to plan and setup an affordable monthly payment option and allow additional time to pay whatever you owe.
Interest will be charged, and they may add penalties – however these may be included in the overall arrangement to pay, therefore added to the monthly payments.
Ideally you should setup the payment plan before the deadline – but you do have up to 60 days after submitting the tax return to complete this, providing that:
- You’ve filed the latest return
- You owe £30,000 or less
- You don’t have any other payment plans or debts with HMRC
- And yu plan to pay the debt off within the next 12 months
If you don’t meet the above criteria you should call the Self Assessment Payment Helpline.
How are monthly payments calculated?
HMRC’s Time To Pay scheme are tailored to individuals and take into consideration your other expenses – such as rent, food and utility bills.
They will only take up to 50% of your disposable income into consideration as part of the arrangement.
These arrangements however are flexible – if you find that your circumstances change, the arrangement can be extended if your income is reduced, or decreased should you have additional funds and wish to pay the arrangement earlier.