As the coronavirus pandemic hit us, the government announced that individuals could defer self-assessment payments due on 31 July.
In normal circumstances, this is the month in which your second payment on account for 2019/20 is due. It is now possible to defer this until 31 January 2021.
However, before you do this, there are two questions that need answering. Firstly, are you eligible to defer self-assessment payments? Secondly, if you are eligible, is it a good idea to defer payment?
Eligibility to defer self-assessment payments
The government guidance is very clear about eligibility. To defer payments, you must be:
“finding it difficult to make your second payment on account by 31 July 2020 due to the impact of coronavirus.”
If you do choose to defer, you will not be hit with any interest or late payment penalties – as long as you settle up by 31 January next year. If you don’t pay by that date, then the debt will begin to accrue interest and penalties as normal.
What if you haven’t been adversely affected by coronavirus?
In theory, if you have not been adversely affected by coronavirus, then you should make your payment as normal.
That said, there is some confusion about this. HMRC has sent out many self-assessment statements showing deferment until 31 January 2021 unless the recipient wants to pay now. These have been sent out, regardless of whether taxpayers are eligible or not.
If you are not eligible and you defer payment, the taxman could in theory chase you for interest and penalties. Whether HMRC pursues this with any vigour is open to doubt, but it’s not worth risking it.
How do I defer self-assessment payments?
You don’t have to do anything. There is no application process. However, if you normally make your payments on account via Direct Debit, you should cancel it. If you don’t HMRC will automatically collect payment.
Should I pay my self-assessment now?
If you’ve been affected by COVID-19 and you can’t afford to pay this month then, yes, you should defer.
However, whether you are eligible or not, it could be a good idea to pay now if you can afford it. This is a deferred payment, not a cancelled one – so if you don’t pay this month, you’ll simply face a larger bill in 2021.
If you’re struggling to pay any tax due, then it’s wise to get in touch with HMRC’s Time to Pay service. If you’re a THP client, we’re also very happy to give you advice on all self-assessment and tax-related matters. Simply get in touch with your account manager to get the ball rolling.
About Jon Pryse-Jones
Since joining THP in 1978, Jon Pryse-Jones has been hands on with every area of the business. Now specialising in strategy, business planning, and marketing, Jon remains at the forefront of the growth and development at THP.
An ideas man, Jon enjoys getting the most out of all situations, “I act as a catalyst for creative people and encourage them to think outside the box,” he says, “and I’m not afraid of being confrontational. It often leads to a better result for THP and its clients.”
Jon’s appreciation for THP extends to his fellow team members and the board. “They really know how to run a successful business,” he says. He’s keen on IT and systems development as critical to success, and he continues to guide THP to be at the cutting edge and effective.