Deferral of second payment on account for those affected by Covid-19
Back in March, Chancellor Rishi Sunak announced that he was deferring the second tax payment on account to January 2021 for those affected by Covid-19.
Most taxpayers within the Self-Assessment system (SA) pay tax in two instalments known as ‘payments on account’ (‘POA’), the first due in July following the end of the tax year and the second in the following January.
There’s been some confusion as originally only self-employed taxpayers were eligible to defer their second POA to January 2021.
This deferral has now been extended to ALL taxpayers within SA regime, including non-individuals, such as trusts.
The deferral is automatic and there will be no penalties or interest providing the full tax is paid by the following 31 January deferral deadline.
If the 2nd POA is deferred, the SA tax bill due in Jan’21 will be much larger than usual (assuming tax is due in the tax year 20/21) and we’d urge taxpayers to make the payment on account in July, if possible. This avoids debt accumulating, reduces potential cash flow issues and pressure on funds which may be depleted due to Covid-19.
If you’ve received a statement on account from HMRC advising that the second POA is now due by 31 January 2021, it’s so that interest isn’t automatically applied to payments made after 31 July ’20.
We appreciate that much has changed and that the communication from the government and HMRC isn’t always 100% clear so please contact Helen Sewell or call 01527 558539 to discuss how the deferral changes affect you and how to manage your personal tax position.