Self employed HMRC tax help: How workers can spread out tax bills with Rishi Sunak’s Time To Pay scheme
STRUGGLING self-employed workers may be able to spread out the cost of their tax bill through the Time To Pay scheme - here’s how it works.
Time To Pay sees self-assessment tax customers set up instalments to help them pay what they owe HMRC.
Previously, self-employed workers could only set up instalments online through Time To Pay for tax owed up to £10,000.
But as of October 1, the threshold for online claims increased to £30,000 so more households can apply for help following the coronavirus pandemic.
The increased limit comes as part of wider support announced through chancellor Rishi Sunak's Winter Economy Plan.
Time To Pay allows you to spread your payments over 12 months if you're applying through the Gov.uk website.
What help is there for self-employed workers?
IF you're self-employed but your business has been disrupted by coronavirus, you may be eligible for the following help:
Self-employed income support extended: Self-employed workers will get two more grants through the self-employed income support scheme.
The new self-employed grant will cover 20% of average monthly profits, up to a total of £1,875, spanning November to January next year.
An additional second grant will also be available for the self-employed to cover February 2021 to the end of April.
The government hasn't said how much this second grant will cover.
The first grant covered March, April and May was worth up to 80% of three month's profit capped at £7,500 in total.
The second was worth up to 70% of profits over three months again - June, July, and August - worth up to £6,750 in total.
More time to pay VAT: Businesses are being given more time to pay their VAT bill.
The lump sum had been due at the end of March next year but instead there will now be the option to pay in 11 smaller interest-free payments.
The repayments will need to be paid through the next financial year which runs from April 2021 to April 2022.
More time to pay bounce back loans: Businesses now have longer to pay back any bounce back loans.
The flexible repayment system, called "pay as you grow" would extend the term of the loan from six to ten year, cutting the monthly repayments by nearly half.
Businesses will also have the option of repaying only the interest of the state-backed loan and businesses that need it can take a break from repayments altogether for six months.
Emergency business loans extended: Businesses have been able to access loans to help them through the pandemic.
Applications have been extended until the end of November for the following loans:
- Coronavirus Business Interruption Loan Scheme
- Coronavirus Large Business Interruption Loan Scheme
- Bounce Back Loan Scheme
- Future Fund
The idea is that monthly repayments will be more manageable than one big annual tax bill.
We explain everything you need to know, including what to do if you owe more than £30,000 and if you need longer than a year to repay your debt.
HMRC estimates around 11million people complete a self-assessment tax form each year.
How do you apply for Time To Pay?
People who work for themselves have to file their tax return with HMRC by January 31 each year.
When it comes to paying your self assessment tax bill, you make one payment by January 31, which covers any tax you owe for the previous tax year, plus another payment for your expected tax for the next year.
The second half of the bill needs to be paid by July 31.
Due to the coronavirus crisis, the government extended the deadline for those struggling so they have until January 31, 2021 to make their usual payment normally due by July 31, 2020.
But to help people further, it's now letting people spread this delayed July payment and the forthcoming January 2021 payment over the course of 12 months.
There are two ways you can apply for a Time To Pay arrangement.
If you owe between £32 and £30,000, and you can pay back what you owe in 12 months, you can apply online through the website.
To register, you'll need to be signed up to Gov.uk and know your government gateway user ID.
You'll then be able to choose how much to pay straight away and how much you want to pay each month via a direct debit.
Paying in instalments shouldn't be taken lightly though, as you'll pay interest of 2.6% on any remaining repayments if your bill isn't cleared by January 31, 2021.
You could also be asked to pay everything you owe in one go if you miss an instalment.
If you owe more than £30,000, or need longer than 12 months to pay back what you owe, you can apply for an instalment plan by calling the Payment Support Service on 0300 200 3835.
Again, you will end up paying interest on top of what you owe.
Sarah Coles, personal finance analyst at Hargreaves Lansdown, said: "Self-employed workers have got used to bad news during the crisis, when every government announcement about support has come with caveats
that exclude millions.
"So it’s yet another blow to discover that when the chancellor announced they could spread their self-assessment payments over 12 months, he didn’t make it clear that they’d pay for the privilege."
We've asked HMRC how long the extended £30,000 threshold for repayments will be available for and we'll update this article when we know more.
The Sun has also asked what the case is for those who owe less than £32, although there's likely no repayment plan for this as the amount is so small.
Who is eligible for Time To Pay?
To be eligible for any help from HMRC, you must have already filed your self-assessment tax return and know what you owe.
You also must not already owe any other money to HMRC, or have any outstanding tax returns to file.
HMRC estimates around 95% of self-assessment customers could qualify to for a Time to Pay arrangement using the online self-service facility.
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