Thu, 30 Jul 20
Buy-to-let landlords facing hardship as a consequence of the coronavirus crisis can defer their July tax payment on account, but taxpayers who have the money are once again being urged to pay now in order to avoid being faced with a double bill.
Most self-assessment taxpayers make one tax payment in January and a second in July each year. These are known as ‘payments on account’.
However, the chancellor, Rishi Sunak, has confirmed that the government will be willing to defer July 2020 payments on account for the self-employed in order to help them through the Covid-19 crisis.
This is an automatic offer with no application necessary, and no penalties or interest for late payment charged if the July 2020 payment is deferred until 31 January 2021, but people are being urged to pay now so that they are not faced with a double bill.
Andy Sanford, a partner at tax and advisory firm, Blick Rothenberg, said: “Many taxpayers will be taking advantage of the self-assessment tax holiday that they were given. However, this is a tax deferral measure, rather than a relief and this will have to paid in January.”
There are three groups of taxpayers for whom taking the tax holiday may not be the right course of action, according to Sanford.
He added: “If you are a partner in an LLP or partnership, and your firm makes your tax payments for you, then you are risking that the firm will be sufficiently solvent to make the payment in January.
“The tax liability is the responsibility of the individual, so if you have any concerns, you should really press for the tax bill to be paid in July.”
Sanford continued: “The second group of taxpayers are those who are ‘spenders’. They should bear in mind, that in the first three months of 2021, the self-employed will have to make not only two self-assessment payments, but also make two VAT payments, catching up on the deferred VAT payment from earlier this year. This will require careful budgeting. For some it may be simpler to pay the liability now if there is spare cash.”
“Finally, there are a group of taxpayers, who may have either been unaffected, or in an industry that has seen an increase in trade through the pandemic. They may simply feel it is not right to take advantage of the deferral.
“For those who are fearing double tax payments in January, consider getting your tax return finished early this year. Not only will it determine your tax liability for the tax year 2019/2020, but it will also be a sensible point to see if payments on account can be reduced for the 2020/2021 tax year.”
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