As a self-employed person, you likely submit a Self Assessment tax return to determine what taxes you owe. As the online submission deadline of January 31 (now extended to February 28) fast approaches, you may worry about how you’ll pay your taxes on time. 

Missing a payment could result in penalty charges and increased interest. Luckily, the HMRC offers a Time to Pay scheme that can give you extra time to manage these payments. 

This guide will discuss the HMRC Time to Pay scheme, including: 

  • What is the Time to Pay scheme? 
  • How does the Time to Pay scheme work?
  • What are the deadlines for this year?

What is the HMRC Time to Pay scheme?

If you can’t pay your taxes on time, Time to Pay might be a welcome solution. The HMRC Time to Pays scheme allows you to pay your taxes in monthly instalments. This way, you won’t have to cover the total cost at once. So if you face financial struggles, this scheme lets you do something about it. 

On the other hand, ignoring the problem and failing to notify the HMRC could lead to penalties worse than fees or interest. The HMRC could eventually take you to court, claim your assets, or close your business. 

With Time to Pay you can avoid accidental tax evasion. It can help you maintain financial and legal health until you’re back on your feet. Still, you can and should only use Time to Pay if you don’t have the funds to pay your whole tax bill. 

How does the Time to Pay scheme work?

The HMRC Time to Pay scheme may sound like an appealing solution. But before you take advantage of it, you may want to know how it works. 

Who’s eligible 

If you want to make an arrangement with Time to Pay, you’ll need to first file your Self Assessment tax return. You’ll also need to be within 60 days of the payment deadline for your bill. Additionally, you’re ineligible if you have any other payment plan arrangements or tax debts. 

To use Time to Pay, you can owe up to £30,000 in taxes and plan to pay off your total bill within 12 months. With that said, if you owe more than £30,000 and need more time, you may still be eligible. To figure this out, you’ll need to call the Self Assessment Payment Helpline on 0300 200 3822.

How to do it 

If you’re eligible for the HMRC Time to Pay scheme, you can arrange it with the HMRC through your Government Gateway account. If that doesn’t work, call the Self Assessment Payment Helpline. 

You’ll also need a few things to make this arrangement and set up instalments: 

  • Your Unique Taxpayer Reference Number 
  • Any relevant reference number for the tax you can’t pay
  • Your VAT registration number (if applicable)
  • Your bank account details 
  • Details regarding any missed payments 

When you contact the HMRC, they’ll likely ask you about: 

  • If you can pay in full
  • How much you can pay each month
  • Your income 
  • Other taxes that you owe
  • Information on your savings and investments 

What you’ll pay 

The HMRC will expect you to pay about half of your disposable income, or the money left over after you pay necessary expenses. For example, if you earn about £1,800 monthly and spend £800 on essential costs, you’ll have £1000 left. So, you’ll likely pay a monthly instalment of £500 towards your tax bill. The arrangement is flexible, so you can pay more when you have it and extend the agreement if your financial situation worsens. 

What are the deadlines for this year? 

  • 31 January – Self Assessment deadline (filing and payment)
  • 1 February – 2.75% interest starts accruing on outstanding tax bills
  • 28 February – last date to file online tax returns to avoid a late filing penalty
  • 1 April – last date to pay outstanding tax or make a Time to Pay arrangement to avoid a late payment penalty
  • 1 April – last date to set up a self-serve Time to Pay arrangement online

Simplify your tax reporting process and more with Countingup 

Financial management can be stressful and time-consuming when you’re self-employed. And if you struggle to plan for or meet your tax bill, you may need to strengthen your financial health and organisation. You can use the Countingup app to make your financial admin easier, just like thousands of business owners already do. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. It helps you organise and simplify your finances by offering valuable accounting features. 

Cash flow insights

You can stay on top of what you spend and earn from your business with cash flow insights. This feature helps you stick to a budget and make stronger financial decisions, such as saving money for tax expenses. 

Expense tools

Expense tools help you maintain accurate financial accounting records to report for your taxes. The receipt capture tool reminds you to snap a picture of your receipt when you make a purchase so you don’t have to keep messy piles of receipts. Then, automatic expense categorisation uses HMRC approved labels so you can easily find tax deductible expenses. This way, you can reduce your tax bill to only pay what you owe. 

Tax features 

The Countingup app also generates year-round tax estimates, so you won’t feel surprised when you receive your tax bill. Plus, these numbers will help you create savings goals so you won’t struggle to pay this expense. The app is even compliant with Making Tax Digital, a government initiative to digitise and streamline the tax process. 

You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

Start your three-month free trial today. 

Find out more here.