As part of their COVID-19 support package, HMRC set up a system for self assessment taxpayers to pay their tax bill in instalments. This is called Time to Pay and, by January 2021, nearly 25,000 taxpayers had signed up for the scheme.
What is Time to Pay?
HMRC recognise that paying two lump sums is more difficult to manage than smaller instalments, especially during our current extreme financial situation. So they now offer a payment plan that allows taxpayers using Self Assessment to pay monthly instead. People can go online and set up a monthly direct debit once they’ve submitted their tax return and have their final tax calculation.
These instalments are for up to 12 months and the payment plan can be set up online by taxpayers themselves. At the beginning were only available to taxpayers who owed up to £10,000. But in October 2020, HMRC raised this threshold to £30,000. By mid January, almost 25,000 people had signed up to this scheme. The average total amount involved in these payment plans is £2,821.
Why has HMRC set up this option?
HMRC’s interim director general for customer services, Karl Khan, said: ‘We know the past year has been tough for many businesses and self employed people, which is why we’re helping them spread the cost of their tax bill into monthly payments. Self assessment taxpayers can use the self serve Time to Pay facility for amounts up to £30,000 with almost 25,000 customers already benefiting from the service.’
We all know that HMRC’s main purpose is to collect our taxes. Given the vast difficulties most people and businesses have faced over the last two years, they have had to be creative in achieving that goal. Time to Pay is a simple, understandable way for people to spread out their tax bill and for HMRC to make sure money is still coming into the Treasury.
It enables you to avoid two large payments and factor in smaller amounts to your monthly budget. Considering how uncertain things still feel, this is real peace of mind for self employed people. No one wants to waste money on penalties and interest charges for late payment.
What are the eligibility criteria for Time to Pay?
In order to use the online Time to Pay system, you need to meet the following criteria:
- You’re up to date with all your tax returns
- You have no outstanding tax bills (not just self assessment)
- The tax you owe amounts to between £32 and £30,.000
- You set up your Time to Pay plan within 60 days of your payment deadline
- You have no other payment plans with HMRC
If you can’t pay other tax bills or your bill is over £30,000, you can’t use the online facility. You need to get in touch with HMRC to see if they can set up a payment plan with you.
Remember that no matter how daunting it seems, the longer you wait to sort it out, the more it will cost you in fines. HMRC can’t help you if you don’t talk to them. And you can’t sort it out by yourself, if you fall outside the Time to Pay criteria.
Watch out for scammers
As usual, fraudsters know exactly what the current problems are for taxpayers and create scams to exploit us. For example:
- You never have to pay to access your online self assessment tax return
- HMRC never phone, message or email to tell you about a tax refund, tax debt or to offer you financial help
Only use their full online address www.gov.uk/hmrc and never click on links or attachments unless you’re 100% sure they’re legitimate.
