What tax do I need to pay by 31st January 2021?

The self-assessment tax return deadline for 2019/20 is fast approaching. It must be filed by midnight on 31st January 2021. Missing this deadline will result in a late filing penalty of £100, regardless of whether you owe any tax (unless you think you have a reasonable excuse for filing your tax return beyond the deadline. You will have to convince HRMC of this).

You must also pay any outstanding tax from 2019/20 by the same date (31st January 2021), unless you have agreed with HMRC a Time to Pay agreement. The amount of tax pending for 2019/20 will depend on whether you decided to delay the second account payment for 2019/20, which was due by 31st July 2020.

To help taxpayers struggling financially due to the ongoing Coronavirus pandemic, self-assessment taxpayers were able to delay making their second payment for 2019/20 and were given the option to pay it by 31st January 2021 instead. Suppose you opted to take this option up. In that case, the balance owing for 2019/20 will be the total liability for the entire year (tax plus, where appropriate, Class 2 and Class 4 National Insurance), less any amount already paid.

If you carried on as usual and paid your July payment as expected (or if you paid it later than expected but have now paid it in full), you would owe the tax for 2019/20 if the total liability is greater than what has already been paid on your account.

Payments on account
If your Class 4 National Insurance liability and overall tax was at a minimum £1,000 for 2019/20, and less than 80% of your overall liability is collected at source, for example, under PAYE. In that case, you’ll have to make payments on your account for last year. Payments will need to be 50% of the 2019/20 tax and Class 4 National Insurance liability. The first payment will be required by 31st January 2021, along with any tax owing for 2019/20. The second payment must be paid by 31st July 2021.

Are you struggling to pay?
For many, 2020 was a challenging year financially. The option to delay the July 2020 payment on account has been taken, taxpayers may struggle to pay the higher than normal January tax bill in full by 31st January 2021. Where this is the case, you can agree with HMRC to pay the tax that you owe in instalments over the year to 31st January 2021.

An arrangement may be agreed upon online if the amount owed is £30,000 or less. Where any unpaid sum is more significant than £30,000, or you need more than 12-months to pay in full, you must contact HMRC to discuss.

Since payments for 2020/21 are based on profits made before the pandemic, if your profits are likely to be lower for 2020/21, you should consider reducing payments.

If you need help filing your self-assessment or have any questions regarding the points raised in this blog, contact us today via email at contactus@accountinggem.co.uk, visit our website www.aag-accountants.co.uk or call us on 01473 744 700 or to find out more. We’re here to help every step of the way.