Self-Assessment payments - time to pay arrangements
Self- Assessment payments including Class 2 National Insurance contributions
Information about payment of Class 2 National insurance contributions through a Time to Pay arrangement, has been added and the Pay in Instalments section has been updated in the guidance by HMRC on how to pay self-assessment.
As one of the Governments coronavirus (COVID 19) supporting measures, Self-Assessment taxpayers were given the option of deferring payment of their July 2020 Payment on Account until 31 January 2021.
If you deferred this payment, you may have had these 3 payments to make on 31 January 2021:
· your deferred July 2020 payment on account (if it remains unpaid)
· any 2019 to 2020 balancing charge
· your first 2020 to 2021 payment on account
If you had difficulty in making all 3 payments at once, you may have chosen to set up a Time to Pay instalment arrangement with HMRC.
If you are Self-Employed and Pay Class 2 National Insurance contributions, you will usually pay them as part of your annual balancing payment.
If you are paying the 3 payments mentioned above through a Time to Pay arrangement, your deferred July payment on account will be cleared first, having the oldest due date. This is to minimise the interest you will be charged.
This could result in your 2019 to 2020 Class 2 National Insurance contributions being paid after their due date of 31 January 2021. Where Class 2 National Insurance contributions are paid after that date it can have a detrimental effect on certain contributory benefits claimed.
If this affects you, contact us and we will notify HMRC on your behalf. HMRC may be able to allocate monies you have already paid for your 2019 to 2020 Self-Assessment liabilities against the Class 2 National Insurance contributions that you owe. You may incur a small amount of interest if they do this, but your contributory benefit claim should be protected.
Pay in instalments
You can pay your tax by instalments if you were unable to pay in full by 31 January 2021. If you have not filed your 2019 to 2020 Self-Assessment return, you will need to file it as soon as possible.
HMRC will then know what payments you owe, and you will be able to set up a Time to Pay instalment arrangement with them.
If you owe up to £30,000 you can do this online without having to contact HMRC directly.
When you have filed your return you will need to wait at least 72 hours before you can set up your Time to Pay arrangement online.
Late payment penalties are charged when tax remains unpaid for 30 days, 6 months and 12 months after the payment due dates. You can avoid the penalties if you enter into a Time to Pay arrangement before they become due and you pay all the tax owing under that arrangement on time.
For Self-Assessment payments that were due on 31 January 2021, you will avoid the first late payment penalty if you set up a Time to Pay arrangement by 2 March 2021. The 6 month and 12 month penalties can be avoided if you pay all the tax owing under that arrangement on time.
Interest is payable on Time to Pay instalments so you should check the interest rates for late and early payments.
If you are unable to pay your self-assessment tax please talk to us about your options and we will endeavour to assist with informing and talking to HMRC.