July tax payments – Do you need to pay them?
On 31 July each year, many individual and trustee taxpayers are used to making an income tax payment on account. Graham Boar, of UHY Hacker Young, writes about changes brought on by the coronavirus crisis.
Early in the COVID-19 pandemic, Rishi Sunak announced that these payments would not be payable in July 2020, instead being deferred and added to the 31 January 2021 payment.
We’re now seeing HMRC begin to issue statements to our clients which surprised us a little. In appearance and timing, they look very much like the normal July payment on account statements with attached payslip, except they carry a due date for payment of 31 January 2021 and the statement (front and back):
“You can defer your July 2020 payment on account. To find out more, go to GOV.UK and search for ‘Defer your Self Assessment payment on account due to coronavirus (COVID-19)’.”
Taxpayers registered for an online personal tax account will be greeted, on logging in, by the message they have £xx amount becoming due for payment 31 July 2020, with the message below:
Delay July’s Self Assessment payment
“Your second Self Assessment payment on account for the tax year 2019 to 2020 is due by 31 July 2020. If you cannot pay because of coronavirus you can delay (defer) your Self Assessment payment until 31 January 2021. You do not need to tell HMRC or apply: it will automatically count as a deferral if you do not pay. You’ll need to cancel your Direct Debit if you set one up for July.”
Anticipating that some confusion may be caused, our advice to taxpayers is that:
- If you can’t afford to pay your 31 July 2020 tax payment, regardless of whether HMRC have sent you a statement and payslip, you are able to defer the payment by simply not paying it (no application or notification necessary).
Where deferral is chosen, the payment which would otherwise be due is added to the amount due for payment on or before 31 January 2021.
- If you are deferring your July payment, don’t fall into the trap of thinking that the amount shown on your recently issued statement is the total amount you’ll be due to pay in January.
You’ll actually be due to pay:
- the deferred amount otherwise payable 31 July;
- any balancing payment for the 2019-20 tax year; and
- your first payment on account for the 2020-21 tax year.
Numbers 1 and 2 won’t be quantified until you’ve filed your 2019-20 tax return.
- If you pay by direct debit, be sure to cancel this unless you want HMRC to collect the July 2020 payment; and
- If you can afford to pay the July 2020 payment then it is permissible (positively encouraged by HMRC) to do so, accelerating HM government’s cash collection at this time of need.
Graham Boar, tax partner, UHY Hacker Young