Huge tax to pay, no way of paying

FrankR

Hi,
I must pay a tax payment to my self employment online account by end of July and I've limited funds to pay due to pandemic and closure of our business. 
Thought about calling hmrc to ask if I can set up a payment plan but the total tax owed is £14k so might be quite large for a plan.

a monthly payment plan would work best for us and wonder if this would be a possibility if we were to enquire to hmrc.  thanks.

Jeremy535897

See https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments

jimmo

Normally for a self-employed person tax of £14k payable by the end of July 2021 would be the second payment on account for 2020/21. That would also mean that you made the first payment on account of £14k in January 2021.

Then, those 2 payments on account would be set against your liability for 2020/21 when it is determined.

It could be a good idea to submit your 2020/21 Tax Return now so that your actual liability for the year can be determined. If your business was badly hit during 2020/21 you could even be due a refund (from the £14k you paid in January 2021) rather than owe HMRC anything.

FrankR

jimmo said:

Normally for a self-employed person tax of £14k payable by the end of July 2021 would be the second payment on account for 2020/21. That would also mean that you made the first payment on account of £14k in January 2021.

Then, those 2 payments on account would be set against your liability for 2020/21 when it is determined.

It could be a good idea to submit your 2020/21 Tax Return now so that your actual liability for the year can be determined. If your business was badly hit during 2020/21 you could even be due a refund (from the £14k you paid in January 2021) rather than owe HMRC anything.

ok. Just so I understand, are you saying that if I submit the most recent tax bill now i.e. before July end, HMRC will recalculate how much tax I owe and give me an exact figure which I need to pay by that time..? This figure could be LESS or MORE than the estimated figure of 14k depending on the figures in that newest submitted tax bill.
Sorry, new to this so all advice welcomed. Thanks!!

jimmo

Yes        

GeordieGeorge

Once this one’s sorted out you really need to start setting aside your tax from your revenue as it comes in, to avoid this sort of issue happening again.

It also helps to make sure you are running the business in a sustainable way; spending the tax money can easily lead to you thinking a failing business should be kept going.

greatkingrat

FrankR said:

jimmo said:

Normally for a self-employed person tax of £14k payable by the end of July 2021 would be the second payment on account for 2020/21. That would also mean that you made the first payment on account of £14k in January 2021.

Then, those 2 payments on account would be set against your liability for 2020/21 when it is determined.

It could be a good idea to submit your 2020/21 Tax Return now so that your actual liability for the year can be determined. If your business was badly hit during 2020/21 you could even be due a refund (from the £14k you paid in January 2021) rather than owe HMRC anything.

ok. Just so I understand, are you saying that if I submit the most recent tax bill now i.e. before July end, HMRC will recalculate how much tax I owe and give me an exact figure which I need to pay by that time..? This figure could be LESS or MORE than the estimated figure of 14k depending on the figures in that newest submitted tax bill.
Sorry, new to this so all advice welcomed. Thanks!!

If your tax return showed you owed 16k in total, then you would still only need to pay the 14k in July. The additional 2k balancing payment would not be due until January 2022.

On the other hand, if your tax return had tax due of 12k, then you would just pay 12k in July.

So there is nothing to lose by submitting your tax return early.

KingOfSnake

Absolutely agree with all the comments - get your return submitted so you know where you are. Also, contact HMRC - they are actually really quite helpful on Time to Pay ("TTP") - search google as I cannot post links. This is even more so in the current situation. They will work out an affordable plan (you will pay interest) and will not be liable to late payment penalties or surcharges, which only increase the amount you owe. It can be quite daunting but £14K is not a lot. Don't put it off - give them a call. 

[Deleted User]

greatkingrat said:

FrankR said:

jimmo said:

Normally for a self-employed person tax of £14k payable by the end of July 2021 would be the second payment on account for 2020/21. That would also mean that you made the first payment on account of £14k in January 2021.

Then, those 2 payments on account would be set against your liability for 2020/21 when it is determined.

It could be a good idea to submit your 2020/21 Tax Return now so that your actual liability for the year can be determined. If your business was badly hit during 2020/21 you could even be due a refund (from the £14k you paid in January 2021) rather than owe HMRC anything.

ok. Just so I understand, are you saying that if I submit the most recent tax bill now i.e. before July end, HMRC will recalculate how much tax I owe and give me an exact figure which I need to pay by that time..? This figure could be LESS or MORE than the estimated figure of 14k depending on the figures in that newest submitted tax bill.
Sorry, new to this so all advice welcomed. Thanks!!

If your tax return showed you owed 16k in total, then you would still only need to pay the 14k in July. The additional 2k balancing payment would not be due until January 2022.

On the other hand, if your tax return had tax due of 12k, then you would just pay 12k in July.

So there is nothing to lose by submitting your tax return early.

If the tax return indicated a liability of £16k in total and the first payment on account has already been made in January, only £2k would be payable at the end of this month.