HomeBlogFinanceTaxpayer late payment plans rise by over a fifth

Taxpayer late payment plans rise by over a fifth

The number of UK taxpayers unable to pay their tax bill in full before the January 2023 deadline has surged, as the rising cost of living weighs on people’s personal finances.

More than 21,000 taxpayers have made an arrangement to pay their self-assessment bill in monthly instalments beyond the January deadline for the 2021-22 tax year, 22 per cent more than set up similar plans at the same time last year.

More than 12mn people needed to file a tax return for the last tax year. Those who have set up a so-called “Time to Pay” plan, which allows payments to be spread over 12 months after the deadline, face a late payment interest charge set at the Bank of England base rate plus 2.5 per cent. This puts the charge at 5.5 per cent from November 22.

Anyone who misses the deadline without setting up a payment plan faces further penalties: an initial £100 as the deadline passes, and £10 a day from May 1 up to £900, with extra penalties applied after six and 12 months. Interest charged on late payments has doubled since the start of the year.

HM Revenue & Customs said in a statement that it is encouraging anyone yet to complete their return to do so early, as “those who have already completed their self-assessment know what they owe and can budget to make payments on time” while those unable to pay will have “plenty of time to access support and advice”.

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

Nimesh Shah, chief executive of tax adviser Blick Rothenberg, said the self-employed population were particularly hard hit during the pandemic. “HMRC had, to a degree, relaxed their stance on offering payment plans and were more understanding of the hardship the self-employed faced, which is compounded to a greater extent now because of the cost of living crisis,” he said.

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

“Those that weren’t able to get on top of the higher tax bills because of previous deferments would now need to access the payment plan option,” he said.

As the cost of living crisis intensifies, finance experts have urged taxpayers to take advantage of reliefs they often fail to claim.

Guy Sterling, a tax partner with accountancy firm Moore Kingston Smith, said: “It is hard to find reliable figures of what is unclaimed, but estimates range up to £1bn in unclaimed tax reliefs each year.”

He said charitable donations and pension contributions are areas where higher and additional rate taxpayers often neglected to claim tax relief. For donations under the gift aid scheme and some pension contributions, tax relief is automatically granted at the basic rate but the additional 20 per cent or 25 per cent can be claimed in a tax return.

Money paid into a pension in excess of the allowance, currently the lower of £40,000 or an annual salary, but tapering down 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 membership fees and work-related subscriptions, may also be eligible for tax relief if not paid for by the employer.

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

Failing to declare all sources of income is another common problem. Tom Henderson, a technical officer for the Low Incomes Tax Reform Group, said self-assessment taxpayers “quite often forget something”, such as money earned through a hobby or selling things online, when earnings exceeded the £1,000 trading allowance. Foreign income needs to be reported too, even if tax has been paid in another jurisdiction.

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

Sterling said it is worth taxpayers checking their bills carefully as “HMRC is not immune from making mistakes”. Any assessments issued by HMRC can be challenged, but there is usually only 30 days to appeal.

Written by: Source link

Leave a Reply

Your email address will not be published.

© Copyright 2022 | Penny Stocks Now | All Rights Reserved.  Powered by Odoss