HMRC Increases Time-To-Pay Threshold

HMRC has announced that it has increased the Self-serve Time-to-Pay threshold from £10,000 to £30,000.

The increase, which came into effect on 1 October, means that more of the 11m taxpayers that use the Self-Assessment tax return system will be able to spread the repayment of their tax liability across (up to) 12 instalments, without having to speak to HMRC staff. The self-serve online Time-to-Pay option has previously been capped to those with tax bills of up to £10,000. Anyone with liabilities beyond this threshold and needing support with repaying monies owed, previously had to contact HMRC to explain their circumstances and agree a repayment plan.

But with the increased limit, HMRC and the Chancellor hope it will ease the burden on those struggling to pay their tax as a result of the Covid pandemic. The increased threshold follows the Chancellor’s statement on 24 September extending the amount of time individuals and companies had to pay other tax and VAT liabilities falling due during the early part of 2020.

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

Customers 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
  • other tax debts
  • other HMRC payment plans set up
• the debt needs to be between £32 and £30,000
• the payment plan needs to be set up no later than 60 days after the due date of a debt

Customers using self-serve Time-to-Pay will be required to pay any interest on the tax owed. Interest will be applied to any outstanding balance from 1 February 2021.

It is important to note that as of October 18, 2021, these latest changes (present in 2023) have been changes made to accommodate businesses too, not just individuals paying their time-to-pay threshold taxes. Thus, if you’re a company looking to pay a debt to HMRC, they will consider the complexity of your figures before making the final decision. 

Therefore, as a business, at first, you will be able to tell HMRC what you believe you can afford to pay and after review, they will not only ask you some questions to see if it’s a debt you can pay off, but also how long you can complete the payments in.

After speaking with HMRC thoroughly, the arrangement of how you’re going to pay your taxes will depend on:

1. How much your business owes in tax
2. How your business is performing financially

This will not be a fixed payment; however, you will be able to vary it based on your income as time goes on.

More details and guidance can be found here or please speak to a member of the Haggards Crowther team.

Terry Smith

Terry started life at HM Revenue and Customs before moving to Ashdens and then on to BDO and Chantrey Vellacott, the combination of which has provided Terry with a wide breadth of experience which has proved invaluable when helping a broad range of clients with their tax affairs.

Whether it involves meticulously organising a client’s tax affairs or leveraging his expertise to mitigate their tax exposure, Terry has a passion for delivering tangible results.