Deferring July’s income tax payment
The last Friday in July is the due date for the second 2019/20 self assessment payment on account. At least, in theory it is…
One of the many measures introduced by the government as part of its Covid-19 programme was the option to defer that second payment. In mid-May HMRC issued guidance on how deferral would operate:
· To be eligible, you need to be registered in the UK for self assessment and “finding it difficult to make your second payment on account by 31 July 2020 due to the impact of coronavirus”.
· There is no requirement to be self-employed, although the measure was launched as targeting that sector. For example, you could be a landlord whose cashflow is reduced by tenants withholding rent.
· There is no need to contact HMRC.
· The deferred payment must be settled by 31 January 2021. That is also when any 2019/20 balancing payment and the first payment on account for 2020/21 fall due.
· Provided you pay by 31 January 2021, HMRC will not levy any penalties or interest.
HMRC’s guidance says: “You can still make the payment by 31 July 2020 as normal if you’re able to do so”, which hardly sounds like compulsion for those unaffected by Covid-19.
Reductions to income caused by Covid-19 could also affect your tax bill in other ways:
· It could mean that it now makes sense to restart child benefit payments because your drop in income means they will not be taxed away to zero.
· You may find that you have regained some or all of your personal allowance for 2020/21.
· You might become eligible for a higher personal savings allowance.
· That first payment on account for 2020/21 due next January may be too high, as it will be based on your (pre Covid-19) 2019/20 tax return.
If you have suffered a drop in income, it is worth checking with your financial adviser on which actions to take now and which can be left to come out in the final HMRC tax calculation.
The value of tax reliefs depends on your individual circumstances.
Tax laws can change. The Financial Conduct Authority does not regulate tax advice.