In measures to help small businesses through the COVID-19 pandemic, HMRC announced that the usual 31 July 2020 self-assessment payment on account can be deferred to 31 January 2021.
How does it work?
You have to make 2 payments on account every year towards your self-assessment tax bill, unless…
- Your last self-assessment tax bill was less than £1,000.
- You’ve already paid more than 80% of all the tax you owe, for example through your tax code.
One of these payments is usually due by 31 July.
What does the deferral mean?
If you are registered in the UK for self-assessment and are finding it difficult to make this July 2020 payment due to the coronavirus situation, you can defer paying until 31 January 2021.
You do not need to tell HMRC that you are deferring and they will not charge interest or penalties on the amount, as long as it’s paid by 31 January 2021.
Should you defer if you have the cash?
This is up to you. However, do note the final balance for your self-assessment liability for the tax year 05 April 2020 and your first payment on account for the tax year 05 April 2021 will also be due on 31 January 2021.
Therefore, if you choose not to pay it, we would recommend budgeting for it and saving the money to ensure you have the cash to pay it in January 2021.
We would also recommend getting your self-assessment tax return completed sooner rather than later so you to know what your January 2021 payment will be, allowing you to budget for this payment.
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