Payment difficulties – Self Assessment 2015
Many contractors and freelance workers submit a Self-Assessment Tax Return. The deadline for filing the Return for the year ended 5 April 2014 and also for having paid any additional tax that’s not collected via the PAYE system is the end of this month (January 2015).
The tax system requires that you pay not only any balancing tax liability but can also require that you make a second payment on account for the current tax year (5 April 2015), both at the end of January, with a second payment on account for the current tax year next July.
If you don’t pay your tax liability on time HMRC will automatically charge you interest from 1 February at 3% per annum, and you would expect that to be the case, but what many contractors don’t realise is that there are additional surcharge penalties that are automatically charged for unpaid tax after 30 days, 5 months and 11 months.
Each penalty is 5% and so your unpaid tax liabilities can rapidly increase significantly.
So, what do you do when you cannot pay?
Our advice for contractors who find themselves in the unfortunate position of not being able to meet their tax liabilities in time there are a few points to consider which might help:
Speak with your contractor accountant – as soon as you’re aware that you will have difficulty with paying your tax liabilities let your contractor accountant know. They will be able to advise you in detail of the options available as they apply to your specific financial position and can help you establish exactly how much tax is due and by when.
Contact HMRC – There is some flexibility possible, depending on your circumstances, so it’s worth exploring your options. For example:
- If your notice of tax changeability was issued late in the year, you have three months from the issue date until the tax is due. If this is the case, it may mean that your personal tax due date for the current tax year is after 31st January.
- If amendments are made to your tax changeability after 1st January additional tax chargeable as a result will not be due until 30 days after the amendment was made. There will, however, still be interest charged if you pay the additional amount after 31st January.
- HMRC will usually accept if you cannot pay by 31st January but promise to pay the full amount owed within 30 days.
- If you cannot pay within 30 days HMRC will consider special circumstances and may reduce penalties in some cases, so speak with them if this might apply to you.
- There are also a number of schemes available which can help you spread out your tax payments as long as you are currently paid up to date. HMRC are obliged to at least consider reasonable payment arrangement proposals. However, if an arrangement is spread over more than 3 months, HMRC will want evidence of income, expenditure and any savings you have.
Being unable to pay your tax liabilities can be extremely stressful, but by taking action as you soon as you become aware there’s an issue you may find there are workable solutions available.
Are you a contractor in need of some advice on your Self Assessment Tax Return? Intouch Accounting are contractor accounting experts, able to provide professional support to Limited Company contractors – leaving you to focus on the matter at hand without needing to worry about your finances.
This blog has been prepared by Intouch Accounting. While we have made every attempt to ensure that the information contained in this blog has been obtained from reliable sources, Intouch is not responsible for any errors or omissions, or for the results obtained from the use of this information. This blog should not be used as a substitute for consultation with professional accounting advisers. If you have any specific queries, please contact Intouch Accounting.