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Self-assessment: Can’t pay your tax bill on time? Here’s what to do to avoid extra penalty charges

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Self Assessment taxpayers have just days to pay any outstanding tax liabilities in full to avoid additional charges. But there is a solution to avoid incurring penalty charges by setting up an online payment plan for the 2019 to 2020 financial year.

How can I avoid a penalty fee?

Last month, HMRC said that due to the impact of the COVID-19 pandemic, they were giving Self Assessment taxpayers more time to pay their tax or set up a payment plan without facing a 5% late payment penalty charge, as long as arrangements were in place by midnight on 1 April 2021.

However, don’t think that missing the payment deadline of 31 January 2021 leaves you free of late charges. If you missed the payment deadline, interest will be charged on late payment at a rate of 2.6%

Those who have yet to settle their liabilities for the 2019 to 2020 financial year can pay their tax bill or set up a monthly payment plan online at GOV.UK. They can pay online, via their bank, or by post.

What if I can’t pay my bill in full now?

Anyone worried about paying their tax and unable to set up a payment plan online should contact HMRC for help and support on 0300 200 3822.

Alternatively, you can set up a Time to Pay arrangement, which allows taxpayers to spread the cost of their Self Assessment tax bill into monthly instalments until January 2022.

Almost 117,000 taxpayers have set up a self-serve Time to Pay arrangement online, totalling more than £437 million.

How are the late charges determined?

  • The payment deadline remains 31 January 2021 and interest will be charged on late payment. The current rate of late payment interest is 2.6%
  • A 5% late payment penalty will be charged if the tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2021. Further, late payment penalties are charged at 6 and 12 months (August 2021 and February 2022 respectively), on tax outstanding where a payment plan has not been set up

What if I had a loss of earnings over the pandemic?

Self Assessment taxpayers who are required to make Payments on Account and know their 2020 to 2021 tax bill is going to be lower than in 2019 to 2020 – for example due to loss of earnings because of COVID-19 – can reduce their payments. Visit GOV.UK to find out more about Payments on Account and how to reduce them.

How do I avoid HMRC tax and phishing scams?

Be aware of copycat HMRC websites and phishing scams. Taxpayers should search ‘self-assessment’ on GOV.UK to get the correct link for their Self Assessment tax return online securely and free of charge.

You also need to be alert if someone calls, emails or texts claiming to be from HMRC, saying that they can claim financial help, are due a tax refund or owe tax. It might be a scam. Check GOV.UK for information on how to recognise a genuine HMRC contact.

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