Applying to HMRC to pay 31 Jan bill in instalments (and reducing your payment on account)
Updated: Jan 12
Make sure you don’t pay more tax than you need to on 31 Jan, and if you are going to have trouble making any payment due, read on.
We and others have recently highlighted that almost any self-assessment taxpayer who will have difficulty making their 31 Jan payment will be allowed a “Time to Pay” instalment plan. This will split up their 31 Jan payment into instalments as 2021 progresses.
Now that many more people have filed their 2019/20 tax returns and applied for Time to Pay, we have more detailed info to share with you which we hope will help you make a successful application if you would like to.
You must have filed your 2019/20 return before you apply (and wait 72 hours for your return to go through). So, DON’T be waiting till 11pm on 31 Jan to do all this. Get your return done now if you haven’t already.
You must have no existing payment plans with HMRC. That said, if you are in hardship and if paying on 31 Jan would cause you further hardship, you should still call them. You won’t be able to make the quick online application, but they will still probably agree to instalments if you discuss it with them on the phone – that’s way preferable to defaulting.
The payment plan can comprise three parts: 1) any 31 July 2020 which was originally due but which you deferred, 2) any 2019/20 balancing payment you have after calculating your return, and 3) your 31 Jan payment on account, if any
These three are added together to make the payment amount, and 2.6% annual interest is added. We aren’t delighted about that, but do bear in mind that that is way less than you would pay on commercial borrowing or overdrafts. On a £5,000 tax bill, the interest payment is approx £10 per month – you won’t be able to borrow more cheaply than that.
You propose a number of months over which to pay the instalments. Remember that if you want to go past 31 July with these, then when we get there, you might have the added complication of needing to pay that on time (if you have a payment on account at all, and if it doesn’t also get deferred by the time we get there).
You make your application by logging into your HMRC account, and selecting the button that says “Set up a payment plan if you cannot pay in full”. This will take you through the application. It’s usually quick and easy.
If you have any difficulty, call HMRC’s payments team on 0330 200 3835. The line is only open Mon-Fri 8am-4pm and they are really, really busy so that’s another reason to progress all this without delay and be sure that you are not left adrift. We are finding on all HMRC helplines that the shortest wait times happen if you call right at the beginning of the opening time.
Good luck and don’t hesitate to let us know if you have any problems or questions.
A PS on applying to reduce your payment on account. Many people will be in this position: they did OK in 2019/20 and have a balancing payment to make this 31st Jan, but they have done worse in 2020/21 so far for obvious reasons. These people should almost certainly reduce their payment on account, but take care.
Estimate your profit for 2020/21. Include any SEISS grants you received, but not any Universal Credit you received. Work out 25% of that profit, as a rule of thumb, to give you a rough estimate of your 2020/21 tax bill.
If that is less than your “Calculated Payment on Account” when you have drafted your 2019/20 tax return, click the “Reduce Payment on Account” button.
Explain briefly in the box that being an actor/stage manager/director/writer/cameraperson etc, you estimate that your profit in 2020/21 will be lower than 2019/20. Enter the total payment on account figure that you calculated.
In the vast majority of cases this will be waved through by HMRC, and your 31 Jan payment will reduce.
Take a bit of care with your calculation, because if you underestimate your profit against how it turns out in the end, they will charge you 2.6% interest on what you should have paid but didn’t on 31 Jan. However, remember that you can guard against that to a degree by doing your 2020/21 return early, say in May 2021 – that way, any interest penalty will probably be very small.
If you have already submitted your return but did not apply to reduce your payment on account and now think you could have done, don’t worry – just go back to your HMRC account and submit an amended return. That is free and easy. In the “Additional Notes to Tax Return” box write: “I am submitting an amendment to my return because I have recalculated my forecast of profits for 2020/21 and I now believe it will be lower than my profits for 2019/20.”
If you have any problems or questions: call us for free advice on 08000 487626, message us on Instagram @accounting4actors or email firstname.lastname@example.org . Our advice on Covid-crisis matters is free and always will be.
Please visit the Accounting4Actors website and find out about tax for actors, accounting for creative and cultural industry professionals, actors’ tax returns, and all accounting for creatives.