Six Month Tax Deferral

Find out how the Government’s Covid-19 tax extension could affect you.

What is it?

If you are self-employed, and have to pay tax above a threshold amount, you will have to make payments of account towards your tax next year.

The second of these payments is normally due on the 31st July, however, due to the Coronavirus, the Government have given an extension to all people who have to make these payments.

This year the Government will let you pay off the bill as late as the 31st January 2021 without enforcing any fines or penalties, and you don’t even have to inform HMRC if you wish to defer.

 

So I don’t have to pay?

This six month extension doesn’t mean that you don’t have to pay, only that you have an extension to pay.

If you leave payment to the 31st January 2021, then you will also have to pay any extra tax due for the 2019-2020 tax year, and the first payment on account for the 2020-2021 tax year, leaving you with a large bill.

If the necessary payments aren’t made by the 31st January, then fines will be enforced, and you will also have to pay interest on the amount you owe.

If you can afford to pay the bill before the 31st January, you could still defer the payment until then and deposit the money in an interest-paying bank account until you need to pay it.

 

If you’ve earned less in the 2019-2020 year than the 2018-2019 year then you can submit your tax return before the 31st January 2021, and HMRC may reduce the amount that you have to pay, and make the amount easier for you to manage in the current climate.

It is always a good idea to get your tax affairs in order as soon as you can, but this year, thanks to the financial impact of Covid-19, it might be even more prudent than normal.