Don’t let the new year be too taxing on your finances - January tax tips

January can be a taxing time for many people… especially if you have a hefty tax bill to pay by the end of the month.

Melanie Peebles, personal tax manager, Exchange Accountants
Melanie Peebles, personal tax manager, Exchange Accountants

After a very challenging two years which has seen the coronavirus pandemic wreak havoc on many Northern Ireland businesses, lots of people might understandably be struggling to pay their Self-Assessment tax bill with the deadline looming on Monday, January 31.

With this in mind, Northern Ireland’s digital accounting specialist Exchange Accountants is offering advice on how to ease your tax burden – and the pressure that comes with paying it.

Urging local businesses ‘not to panic’, Melanie Peebles, personal tax manager at Exchange Accountants, explained: “After the expense that comes with Christmas, January is generally a tough month as far as finance is concerned for most people, let alone those with a Self-Assessment tax bill to pay.

“First of all, don’t panic! Although you should always try to pay your tax by the deadline, HM Revenue and Customs (HMRC) is waiving late filing and late payment penalties for Self-Assessment taxpayers for one month – to give you extra time, if needed, to complete your tax return and pay any tax due.

“Interest will be charged on monies owed from Tuesday, February 1 as normal, so it is still better to pay on time if possible, but you won’t face a late filing penalty if you file online by Monday, February 28.

“Nor will you receive a late payment penalty if you pay your tax in full or make a payment arrangement with HMRC by Friday, April 1 after which a late payment penalty of 5% will be applied on tax still unpaid - with further penalties introduced after 6 and 12 months.

“Support is available from HMRC for anyone struggling to pay their tax bills, so we thought we would put together some advice and tips to help people submit their tax return and pay their tax on time.”

How to pay your tax bill

There are a number of ways to pay your tax bill but you need to be careful that you take into account the number of days for your transaction to go through and be processed.

For same or next day transactions, taxpayers can pay via their online or telephone banking account, CHAPS, debit or corporate credit card online, or at their bank or building society (for which you’ll require a paying-in slip from HMRC).

You need to allow three working days for payments made by cheque, BACS or a pre-existing direct debit (allow five days if setting up a new one).

However a further word of caution from Exchange’s Melanie Peebles.

She continued: “Remember that if the deadline falls on a bank holiday or weekend, you need to have your return submitted and paid by the last working day before the deadline.

“And try not to leave it to the last minute when making online payments as the system could be very slow due to the service being exceptionally busy at these times.”

If you’re struggling to pay your tax bill

If you are struggling to pay your tax bill by the deadline, you can apply online via HMRC’s website to make a ‘Time To Pay’ (TTP) arrangement to spread your repayments over up to 12 months.

In order to avail of this support, taxpayers must have submitted their tax return, owe less than £30k and be within 60 days of the original payment deadline (i.e., before Friday, April 1 for tax due on Monday, January 31).

However it must be noted that you must have no other HMRC payment plans set up, and no other tax debts or outstanding tax returns.

If you meet these criteria, you can apply online to set up a direct debit and pay your tax bill over a period of up to 12 months - without having to discuss it with HMRC and without having to provide details of current income and expenditure.

Taxpayers should wait three days after filing their tax return to set up an online ‘Time To Pay’ arrangement – which can only be set up directly by the taxpayer and not by any associated representative.

In setting up a ‘Time To Pay’ arrangement, you will be asked if you want to pay a lump sum up front, how much you can afford to pay in instalments and over what period of time.

Interest will be accrued at the HMRC late payment interest rate (currently 2.6% APR) for all tax outstanding from the original due date until the debt is cleared.

Late payment penalties will be avoided, provided you don’t break your ‘Time To Pay’ agreement.

For debts of more than £30k or which need longer than 12 months to pay, taxpayers should call the Self-Assessment Payment Helpline on 0300 200 3822. More information is also available on www.gov.uk/difficulties-paying-hmrc/pay-in-instalments.

Outlining Exchange Accountants Top Five Tax Tips:

1) Don’t miss the deadline!

HMRC may have granted a one-month extension to give people extra time to file their tax return and pay any tax due, but make sure that you submit your return on time and either pay your tax bill or set up a ‘Time To Pay’ arrangement with HMRC if you are struggling to pay the full amount.

Remember, HMRC wants to help you pay your tax bill – so don’t simply avoid or ignore it as that could prove more costly than was originally intended.

2) Think ahead – and budget accordingly!

Speak early to your accountant, ascertain how much your tax bill is likely to be, and set aside a portion of your income every month to ensure that you can afford to pay when the deadline arrives.

3) Online is easier!

Filing your tax return online means that you don’t have to do everything at once.

You can upload some of the information you need, save your form and return to it later at a time that suits.

4) Steady as you go!

Try to keep accurate records of your income and expenses as you go along through the year – so you don’t have to go through it all at the last minute.

You can use online accounting software, such as Xero, or create a spreadsheet to record all of your invoices, bills, payments and expenses.

HMRC can request to see records dating back six years – so make sure you keep them for at least that length of time.

5) It’s good to talk!

Find yourself a good accountant to advise you on any areas of doubt and to help make sure that your tax return is submitted correctly and on time.

Melanie added: “Like I said earlier, don’t panic! There is always help out there if you need it, so remember that you are never alone. Just speak to your accountant or directly to HMRC and they will hopefully help you find a solution.”

Established in 2011, Exchange Accountants provides premier accountancy services and tax advice to a wide variety of locally based SMEs and individuals.

Based in Lisburn, Exchange was the first accountancy practice in Northern Ireland to be recognized as a Xero Gold Partner – and last year, the company achieved Platinum Partner status with the market-leading cloud accountancy software provider.

For more information on Exchange’s digital accountancy services and self-assessment tax support, click on www.exchangeaccountants.com, call 028 9263 4135 or send an email to [email protected]

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