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Time’s running out! | TaxTalk

February 25, 2022

Hairdressers have until Monday (28th February) to file their self-assessment tax return and pay any tax due, without incurring a late filing or payment penalty. Last month, HMRC announced that it would, like last year, provide self-employed workers with an additional 28 days to submit their 2020/21 tax return and settle their tax bill, temporarily suspending its usual financial sanctions for failing to meet the strict deadline.

If 31st January self-assessment deadline passed and 28th of this month has come around just as quickly, then don’t despair if you’re worried about paying your tax bill. There’s still the opportunity to avoid the wrath of HMRC by submitting your tax return before Monday and applying for a Time to Pay arrangement by 1 April. 

According to HMRC, almost 100,000 people have used online payment plans to spread the cost of their tax bill since April 2021. This equates to more than £310 million worth of tax. The growing trend of paying in monthly amounts mirrors our own findings. A recent survey of self-employed worker by GoSimpleTax showed that 37% of people said they would rather pay monthly or quarterly, which is far more in line with the Government’s Making Tax Digital plans.

Once a self-employed worker has filed their 2020/2021 tax return, they can set up a Time to Pay arrangement for up to 12 months on debts up to £30,000, that they’re unable to pay in full. This can be done online at GOV.UK without speaking to HMRC and lets you spread the cost of your tax bill by paying what you owe through affordable monthly payments based on your income and expenditure.

Time to Pay is based on an individual’s specific financial circumstances, so there is no ‘standard’ time to pay arrangement. HMRC will establish your ability to pay using an ‘income and expenditure’ assessment. This looks at your income, disposable assets and expenditure to calculate your disposable income.

The key is to submit your 2020/21 self-assessment tax return as soon as possible; HMRC will then be able to work out what you owe, enabling you to set up a Time to Pay instalment arrangement. But remember, once you’ve filed your return, you’ll need to wait at least 48 hours before you can set it up online.

It’s important to note that by entering a Time to Pay arrangement before your tax bill is due, you can avoid late payment penalties, as long as you pay all the tax owing under that arrangement on time, which also attracts interest.

Mike Parkes is Technical Director at GoSimpleTax – the online tax return and self-assessment software.