Taxpayer late payment plans rise by more than a fifth

The number of UK taxpayers unable to pay their tax bill in full by the January 2023 deadline has risen as the rising cost of living takes a toll on people’s personal finances.

More than 21,000 taxpayers have arranged to pay their self-assessment bill in monthly installments beyond the January deadline for the 2021-22 tax year, 22% more than similar plans implemented at the same time last year.

More than 12 million people had to file a tax return for the last tax year. Those who created a so-called “Time to paywhich allows payments to be spread over 12 months after the deadline, are liable to late payment interest fixed at the base rate of the Bank of England plus 2.5%. This puts the load on 5.5% from November 22.

Anyone who misses the deadline without having a payment plan in place faces additional penalties: £100 when the deadline expires, and £10 per day from May 1 up to £900, with additional penalties applied after six and 12 months. Default interest has doubled since the beginning of the year.

HM Revenue & Customs said in a statement that it encourages anyone who has not yet completed their declaration to do so early, as “those who have already completed their self-assessment know what they need and can budget to make payments on time” while those who cannot pay will have “ample time to access help and advice”.

For the 2020-21 tax year, HMRC has given taxpayers affected by the pandemic an extra month to file their returns before being charged the fixed £100 penalty. This year, the tax authorities have given no indication that they will grant a similar concession.

Nimesh Shah, managing director of tax adviser Blick Rothenberg, said the self-employed population has been hit particularly hard during the pandemic. “HMRC had, to some extent, softened its stance on offering payment plans and had a better understanding of the difficulties the self-employed were facing, which are compounded to a greater extent now due to the cost of care crisis. life,” he said.

He added that as the government allowed people to defer the second payment due on the account in July 2020, many of those who did would now be catching up on paying their tax bills.

“Those who were unable to pay the higher tax bills due to previous deferrals should now access the payment plan option,” he said.

As the cost of living crisis intensifies, financial experts have urged taxpayers to take advantage of relief they often go unclaimed.

Guy Sterling, a tax partner at accountancy firm Moore Kingston Smith, said: “It’s hard to find reliable figures on what’s unclaimed, but estimates range up to £1bn of ‘unclaimed tax breaks every year.’

He said charitable donations and pension contributions are areas where higher and supplemental rate taxpayers often fail to claim tax relief. For donations under the Donation Assistance Scheme and certain pension contributions, tax relief is automatically granted at the basic rate, but the additional 20 or 25% can be claimed on a tax return.

Money paid into a pension exceeding the allowance, currently the lower of £40,000 or an annual salary, but declining for high earners, will be subject to a tax bill. Any unused allowance can be carried forward for three years.

Work-related expenses, such as vehicles used for work, professional body dues and work-related subscriptions, may also be eligible for tax relief if not paid for by the employer.

An easily overlooked relief is Marriage Allowance, which allows spouses and civil partners to transfer part of their allowance and save up to £252 in tax where someone is a basic rate taxpayer and the other earns less than the personal income tax allowance of £12,570. .

Not declaring all sources of income is another common problem. Tom Henderson, a technical lead with the Low Incomes Tax Reform Group, said self-assessment taxpayers “quite often forget something”, such as money earned from a hobby or selling things online. , when earnings exceed the £1,000 Bargaining Allowance. Foreign income must also be declared, even if the tax was paid in another jurisdiction.

Mike Hodges, head of private wealth at accountancy firm Saffery Champness, said the potential pitfalls when completing a self-assessment tax return are “many and varied”, but pointed to the risk of claiming too much. of tax deductions by failing to recognize the difference between personal and business expenses and failing to report child benefit payment, if received, where a taxpayer or their partner earns more than £50,000 a year.

Sterling said it was worth taxpayers checking their bills carefully as ‘HMRC are not immune to making mistakes’. Any valuation issued by HMRC can be challenged, but there are usually only 30 days to appeal.

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Elaine R. Knight