More than half of self-employed people will hang fire on paying their next tax bill, due to financial pressures of the Coronavirus pandemic – with some still undecided, despite the deadline looming on 31 July.
According to a survey of those in self-employment, 56% of people have decided to defer their Self-Assessment Payment on Account, which is due at the end of the month.
A further 18% have yet to make a decision, choosing to hold out until nearer the time.
Under COVID-19 rule changes, the self-employed have the option to defer their second payment on account for the 2019/2020 tax year until 31 January 2021.
While HMRC will not charge any interest or penalties on any deferred amount, provided it’s paid by the extended January deadline, people are still required to submit their self-assessment tax return to HMRC on time.
Mike Parkes, Technical Director at GoSimpleTax, a self-assessment tax software which conducted the survey, commented: “It’s perfectly understandable why many will choose to take advantage of HMRC’s temporary tax deferral scheme, given the financial burden people have faced during lockdown. However, delaying the payment will mean that a number of tax liabilities will fall all at once. These could include balancing payments due for the 2019/2020 tax year, and the first payment on account due for the 2020/2021 tax year.
“Unless you have your house in order by that date, and sufficient funds in place to cover all tax liabilities, a deferral could create a ‘perfect storm’. What’s more, once 31 January passes, HMRC will not hesitate to reimpose the interest charges, penalties and collection procedures usually in place.”
Despite the majority of people choosing to defer their Self-Assessment Payment on Account in July, 55% of those who responded to the survey said they were concerned about increasing liabilities in January 2021, with 64% admitting that they don’t fully understand the tax implications and eventual cost of Government grants.
Of those support packages available to the self-employed and small businesses, 50% found the Coronavirus Job Retention Scheme the most helpful, with 25% choosing the Self Employment Income Support Scheme (SEISS), 15% income tax deferral and 10% the Small Business Grant Fund.
Parkes added: “The Government’s unprecedented support packages have undoubtedly provided much-needed financial assistance to the self-employed and small businesses. But, with so many options on the table, including Business Rates Relief and VAT deferrals, understanding the implications and tax liabilities that come with accepting these emergency measures can be daunting and confusing during an already complex time. As such, it’s essential for people to use this time to get their tax affairs in order which, in the long term, will provide them with a much clearer picture of their finances.”
