One measure announced by the government to help businesses during the Covid-19 pandemic is to defer the July 2020 payment on account. It allows self assessment tax payments usually due by 31st July 2020 to be deferred until 31st January 2021.
You do not need to apply for the deferral, it is automatic if the 31st July payment on account is not made. No interest or penalties will be charged provided the payment is made in full by 31st January 2021.
Self assessment taxpayers are able to make the payment as normal or pay anytime between now and 31st January 2021. This can be as one payment or in instalments. You do not need to tell HMRC if you plan to pay in instalments. The deferral is optional and if you can pay your second payment on account as expected we would encourage you to do so.
Whilst the deferral brings a welcome cashflow advantage in the short term if you choose to defer you should be mindful you may have a larger than normal payment in January 2021. The payment due on 31st January 2021 will consist of three elements:
- The balancing payment for 2020
- The first payment on account towards 2020/21
- The deferred payment on account from 31st July 2020
Once your 2019/20 tax return is complete and we have calculated your tax liability you will be well placed to plan for future payments.
If your tax is paid by direct debit it will be processed as normal. If you wish to defer your payment please contact your bank to cancel the direct debit instruction.
Please get in touch if you have any questions or would like to discuss deferring your payment on account.