Tax

Taxpayers could face increased tax bill in January

Taxpayers could face a tax bill “twice its normal size” next month, due to the previous deferral of a 31 July payment on account bills from this summer, according to accountancy firm Moore.

This will reportedly result in taxpayers having to face paying the July tax bill, as well as the first payment on accounts for the 20/21 tax year, by 31 January 2021

The accountancy firm warned this is “likely to be unaffordable” for many taxpayers, whose current income may have dropped “significantly”.

This year, however, those who can’t afford to pay tax bills on time, in cases where they have been financially impacted by the pandemic, may be able to contact HMRC to reschedule their debts.  

Moore expects HMRC to be “more willing” to reschedule the payment of self-assessment tax bills than in previous years, but taxpayers must arrange this with HMRC in advance or risk receiving large late payment penalties.

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This year, HMRC has also allowed more taxpayers to enter into online ‘Time to Pay’ arrangements, while increasing the maximum tax liability threshold of online arrangements from £10,000 to £30,000.

Time to Pay allows taxpayers to stagger repayments of outstanding tax bills without incurring any penalties for late payment. However, interest will still be charged on any tax owed.

Lucienne Parry, partner at Moore, said: “With the freeze on penalties for late tax payments ending in a matter of months, taxpayers need to ensure they can pay their next bill.

“Individuals who suspect they will struggle to pay their upcoming tax bill must act as soon as possible – if they chose to ignore it, they leave themselves vulnerable to very big penalties. If you are already so short of money that you can’t pay your tax bill those penalties will really hurt.” 

She added: “Fortunately, there are options available to reschedule payments. HMRC is offering a helping hand during the current pandemic but they won’t help you if you don’t approach them.”

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