January is never a great month for cashflow, coming straight after Christmas when your business has been closed for the holiday plus this year the impact of Coronavirus restrictions. On top of all this is the tax to pay, corporation tax for 31 March year ends due on 1 January 2021 and Self assessment tax on 31 January 2021, plus VAT, but there’s another blog about VAT see below.
So what can you do to help your cashflow? Let’s take a look at Self Assessment and corporation tax to see what options are open to you.
Personal tax – Self Assessment
Tax that was due on 31 July 2020 – (the second payment on account for the year ended 5 April 2020)
You could have deferred this until 31 January 2021. If you are unable to pay this in full by 31 January 2021, get in touch with HM Revenue and Customs (HMRC) to arrange a ‘Time to Pay’ arrangement, you can set up a payment plan to spread the cost of your latest Self Assessment bill if:
• you owe £30,000 or less
• you do not have any other payment plans or debts with HMRC
• your tax returns are up to date
• it’s less than 60 days after the payment deadline
Payment plans can be set up through your online tax account with HMRC or by calling the HMRC Self Assessment Helpline on 0300 200 3822.
You can also ask for a ‘Time to Pay’ arrangement for Self Assessment tax due on 31 January (the balance of tax due for the year ended 5 April 2020 and the first payment on account for the tax year ending 5 April 2021).
Reduce your payments on account
If you expect your income to be less in the current tax year (year ending 5 April 2021) than the previous tax year, for what ever reason including the impact of the Coronavirus, you can make a claim to reduce your payments on account. Your payment on account will have been based on the tax due for the year ended 5 April 2020, in which may have had a higher income. You can do this any time after your tax return for the year ended 5 April 2020 has been submitted. You will need to work out what your expected tax bill will be for the current tax year to do this.
Getting tax collected through your PAYE code – tax due for the year ended 5 April 2020
You can pay your Self Assessment bill through your PAYE tax code over 12 months from 6 April 2021 as long as all these apply:
• you owe less than £3,000 on your tax bill
• you already pay tax through PAYE, for example you’re an employee or you get a company pension
• you submitted your paper tax return by 31 October or your online tax return online by 30 December
HMRC will automatically collect what you owe through your tax code if you meet all 3 conditions, unless you’ve specifically asked them not to (on your tax return).
Company tax (corporation tax)
If your company is have difficulty in paying its corporation tax, you can apply for a ‘Time to Pay’ arrangement. To be able to do this your company tax return and accounts must have been submitted to HMRC so they can see what you owe. If you have a 31 March 2020 year end and don’t submit your accounts until 31 March 2021 (taking advantage of the extended submission deadline with Companies House) you may miss the chance to get a time to pay arrangement in place for the due date of 1 January 2021.
You can discuss a ‘Time to Pay’ arrangement with HMRC by calling the HMRC Payment Support Service on 0300 200 3835. Have to hand your company’s corporation tax reference number, the amount of tax due, an idea of a plan that you think your company can manage and your bank details to set up a direct debit.
So that’s a summary of the help that is available to reduce the impact of paying taxes on your cashflow in difficult times. We’re always happy to help business owners with their tax problems, give us a call on 01803 296678 to see if we can help you.
If you want to find out about VAT and ways to pay you may be interested in the New VAT payment scheme to help your cashflow