Even some of the most organised people may find that they struggle to pay their Self Assessment tax bill on time. With the increased cost of living and high energy costs, it’s understandable that some people may struggle to find the money to cover their tax 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 for late payment. Interest is charged on any unpaid tax from the due date until it’s paid in full. The interest rate for late payments is the Bank of England base rate plus 2.5%. If HMRC owes you a repayment, they pay interest at the base rate minus 1% (with a minimum of 0.5%).
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 set up a Time To Pay arrangement.
This is where HMRC will work with you to plan and set up 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 set up the payment plan before the deadline – but you do have up to 60 days after the payment due date to set this up online, providing that:
- You’ve filed your latest tax return
- You owe £30,000 or less
- You don’t have any other payment plans or debts with HMRC
- You plan to pay the debt off within the next 12 months
If you don’t meet the above criteria, or if you need longer than 12 months to pay, you should call the Self Assessment Payment Helpline.
How are monthly payments calculated? #
HMRC’s Time To Pay arrangements are tailored to individuals and take into consideration your other expenses – such as rent, food and utility bills.
They will generally only take up to 50% of your disposable income into consideration as part of the arrangement.
These arrangements are flexible – if you find that your circumstances change, the arrangement can be extended if your income is reduced, or you can pay it off earlier should you have additional funds available.
How do I apply? #
You can set up a Self Assessment payment plan online if you meet the criteria above.
If you need to speak to HMRC directly, contact the Self Assessment Payment Helpline.
