Self Assessment Tax Payments 2019/20 – COVID-19

As we are sure you all know by now, your second payment on account for 2019/20 which is normally due for payment on 31 July 2020 can be (optionally!) deferred until 31 January 2021. This applies to ALL taxpayers not just the self-employed. It is also worth mentioning that the deferral is automatic, so there is no need to make an application or make HMRC aware of this. HMRC have confirmed there will be no interest and penalties charged providing the payment is made by 31 January 2021.

This is obviously great news but what about what you have already paid for the first payment on account on 31 January 2020? With the huge amount of changes in the last couple of weeks it is worth revisiting your expected 2019/20 income level to see if a reduction in payments on account is warranted. Many individuals and businesses will suffer a significant drop in income for March 2020 and may also suffer bad debts related to 2019/20 for some time after the year end or there may be a substantial fall in expected dividend income for 2019/20 tax year.

It is therefore worth calculating an estimate of your tax liability for 2019/20 to see if this is likely to be less than the tax liability that arose in 2018/19. If it is likely to be lower than we can apply to reduce your payments on account which could lead to an actual tax repayment now as well as the already announced deferral for the 31 July 2020 instalment.

Example
Tax Liability for 2018/19 = £20,000
Tax Liability for 2019/20 = £10,000

No Action Taken
1st Payment on account already paid on 31 January 2020 = £10,000
2nd Payment on account due for payment on 31 July 2020 = £10,000 (deferred until 31 January)*
*No actual deferral achieved, as full liability was already paid

Action Taken Now
1st Payment on account reduced to £5,000 – TAX REPAYMENT OF £5,000 now
2nd Payment on account reduced to £5,000 – Not payable until 31 January 2021

As well as having the time which you would not usually have to get this done, It is also extremely important to make everyone aware that it will be advantageous to file your 19/20 self-assessment tax return as soon as possible after 5 April 2020 as this should facilitate planning for the tax payment due in January 2021 and perhaps crystallise any tax refund due, as a result of a reduction in income or any loss relief available.

If you would like to discuss any of the above and/or to get your 2019/20 tax return filed as soon as possible after the 5th April 2020, please contact your manager at Nordens or businessdevelopment@nordens.co.uk so we can prepare everything for you.

*please note that depending on location, we have a paperwork pick up and drop off service available should you require it*