At the start of the pandemic, the Chancellor provided an automatic deferment of the second payment on account which was due at the end of July. No one had to make a claim to do so and no interest was charged. Many of the self-employed are struggling more now than they were last July and the Chancellor needs to throw a much needed lifeline.
Payments should be deferred until at least the end of this year, to give the self-employed time to catch up. Especially as many of them have not benefited from the wider and more generous business support measures.
Last September, Rishi Sunak announced an extension to HM Revenue & Customs’ (HMRC) Time to Pay scheme which allowed Self-Assessment taxpayers to submit a deferral claim for their 31 January tax payment up to £30,000; interest would arise on the deferral at 2.6%. To make a Time to Pay claim, you needed to have filed your tax return.
The September scheme was mainly targeted at self-employed individuals who had seen their trading profits reduce because of the pandemic, but it was significantly less generous than the previous automatic deferral.
Self-employed individuals need more help now than in July and the Government and HMRC should provide a blanket deferral for the self-employed. HMRC should be able to easily filter Self-Assessment tax returns for those who complete the self-employment pages of the tax return and apply an automatic deferral to their accounts.
Self-employed individuals are worried about filing their 2019/20 tax return and seeing their tax liability; they are concerned about how they will pay the tax owed when they may not have. The problem is made worse for some individuals because their tax payment due at the end of this month could also include the deferred second payment on account from last July, and this means that a much higher sum than normal is due.
There hasn’t been enough publicity from HMRC about the option to defer up to £30,000 of your tax payment. There has been plenty of recent noise about HMRC being lenient over late filing penalties, but I would argue that HMRC should be encouraging people to file their tax returns on time and the Government should offer an automatic deferral for the self-employed, largely as they did last year.