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Can I pay my income tax in instalments?

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If you pay your income tax by Self-Assessment you can now apply online to pay your tax bill by monthly payments, without the need to call HM Revenue and Customs (HMRC).

The online payment plan service can already be used to set up instalment arrangements for paying tax liabilities up to £10,000. From 1 October 2020, HMRC has increased the threshold to £30,000 for Self-Assessment, to help ease any potential financial burden taxpayers may be experiencing due to the coronavirus pandemic.

The increased self-serve time to pay limit of £30,000 follows the Chancellor’s announcement on 24 September that the following bills could be paid in monthly instalments up to 12 months:

  • any deferred payment on account bill from July 2020,
  • any outstanding tax owed for 2019 to 2020 and
  • the first payment on account bill for this current tax year

Once you, or your accountant, have completed your tax return for the 2019 to 2020 tax year, if you have payments to make you have the option of using the online self-serve time to pay facility through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments.

HMRC estimates around 95% of Self Assessment taxpayers who are due to make payments on 31 January 2021 could qualify to implement a time to pay arrangement using the self-serve facility without needing to speak to an HMRC adviser.

Taxpayers who wish to set up their own self-serve time to pay arrangements must meet the following requirements: they need to have no outstanding tax returns, no other tax debts and no other HMRC payment plans set up. The debt needs to be between £32 and £30,000 and the payment plan needs to be set up no later than 60 days after the due date of the debt.

You can set up your own online payment plan to help spread the cost of your tax bill by visiting https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments.

Interest will be charged on the tax owed will be applied to any outstanding balance from 1 February 2021.and

Please be aware of scams claiming to be from HMRC, offering to help you set up payment plans to pay any tax owed. These scams are trying to harvest your details to steal your money. Check GOV.UK for information on how to recognise genuine HMRC contact.

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