As part of its ‘Festive Finances’ campaign, HMRC has reminded self-employed taxpayers of its ‘Time to Pay’ arrangement, ahead of the upcoming Self Assessment tax return deadline on 31st January 2025.
In a statement, published on 10th December, HMRC acknowledged that at this time of year, many households are considering their finances in the run up to Christmas.
As such, it is promoting its ‘Time to Pay’ arrangement, intended to help freelancers, contractors and millions of other self-employed workers spread the cost of their tax bills into manageable monthly payments.
15,000 ‘Time to Pay’ arrangements in place
Given the financial and economic challenges many have faced in recent years, the ‘Time to Pay’ option could help those self-employed individuals who are unable to settle their tax bills in full by the deadline.
Already, as many as 15,000 self-employed workers have set up an installment plan for the 2023/24 tax year – which is the period that the upcoming tax deadline relates to.
The arrangement can be used by taxpayers facing financial challenges to spread payments across 12 months in total. Individuals who owe less than £30,000 are eligible to apply online, though those with tax liabilities greater than this threshold must contact HMRC to arrange a bespoke payment plan.
Only taxpayers who have already filed the Self Assessment for the 2023/24 tax year can apply.
‘Valuable’ option for financially stretched freelancers
Myrtle Lloyd, HMRC’s Director General for Customer Services, explained that the arrangement is “valuable” for those who need “extra flexibility” when paying their tax bill.
“We’re here to help customers get their tax right and if you are worried about how to pay your Self Assessment bill, help and support is available”, Myrtle said.
“Customers can set up their online payment plan to suit their own financial circumstances and can spread those payments across a maximum of 12 months”, she added, before concluding that the measure is a “valuable option for someone needing extra flexibility in meeting their tax obligations.”
Self-employed must be mindful of interest
However, users of the ‘Time to Pay’ arrangement have been reminded that “any missed payment[s] will incur interest as well as a penalty”.
The interest charged by HMRC is calculated as the Bank of England (BoE) base rate, plus 2.5%. Currently, late payments are subject to 7.25% interest – though HMRC reviews its interest rate every time the BoE base rate changes.
With this in mind, HMRC is urging taxpayers who use the service, or are considering using it, to “budget accordingly to ensure regular monthly payments can be made”.
In the same statement, the tax authority is also encouraging taxpayers to be mindful of scams, following an increase in reported activity in the past 12 months. HMRC is encouraging taxpayers to be vigilant, not to disclose any personal information when contacted by someone claiming to represent the tax office, and to report any suspected scams or suspicious activity online.
To learn more about Time to Pay, please visit the government website.
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