Muras Matters: Self Assessment Tax Due July 2018

Self Assessment

Tax Due July 2018

Tax due July 2018

Taxpayers registered under Self Assessment will need to make their second payment on account for 2017/18 by the deadline of 31 July 2018.

This second payment on account is based on 50% of an individual’s combined Self Assessment tax and class 4 NIC liability for the 2016/17 tax year. There can be beneficial cash flow opportunities however where the actual liability for 2017/18 is either higher, or lower, than 2016/17.

2017/18 liability is lower than 2016/17

Where an individual’s taxable income has decreased, when compared to 2016/17, after deducting the January and July 2018 payments on account tax will have been overpaid. There is no legal requirement to alter the July payment on account, and HMRC will be happy to hold on to the overpayment until the actual liability has been established.

Where an individual believes their liability will be less however a formal application can be made to HMRC to reduce their July payment on account.

2017/18 liability is higher than 2016/17

Where an individual’s taxable income has increased, when compared to 2016/17, after deducting the January and July 2018 payments on account there will be a balance owing to HM Revenue & Customs. This additional liability is not required to be added to the July payment on account, and HMRC will not request that it is. The balance is not in fact due until 31 January 2019, effectively providing 6 months interest free credit.

Therefore, at 31 January 2019, an individual will be required to pay the balance for 2017/18 together with their first payment on account for 2018/19 of 50% of the total liability for 2017/18.

What to do if can’t pay your tax on time

Taxpayers struggling to pay their second payment on account on 31 July may, under certain circumstances, be able to enter into an extended payment agreement with HM Revenue & Customs.

In such a situation, an individual should firstly make a realistic estimate of when they can settle the amounts due, either via instalments or by payment in full and then contact HMRC’s Business Payment Support Service on 0300 200 3835. Despite its name non business customers can also use this number to request an extended payment scheme. Generally, HMRC are likely to agree as long as the repayment schedule suggested clears any outstanding liability before the next liability becomes due for payment.

It is important that contact is made with Business Payment Support BEFORE the tax is due for payment on 31 July 2018, otherwise penalties may be applied for late payment and HMRC may not agree to an extended payment schedule. It will obviously be harder to make contact nearer the deadline as the volume of taxpayers seeking to make an arrangement increases. We would therefore recommend getting in touch with HMRC sooner rather than later.

As the arrangements are at HMRC’s discretion they can refuse a request and insist that the tax due is paid. In order to agree to a delayed payment plan however HMRC will require a significant amount of information in order to assess an individuals circumstances. This will include:

  • the tax reference number (e.g. 10-digit unique taxpayer reference)
  • the amount of tax due and the reason why payment is difficult
  • what action has been taken to try to obtain the funds to pay (e.g. contacting a bank or other lenders)
  • how much can be paid immediately and how long is required to pay the balance
  • details of income, expenditure, savings and investments
  • the actions being taken to get tax payments back in order.

HMRC will still charge interest on any extended payment liabilities but surcharges are not applied if payments are made as agreed in the arrangement.

Late Payments and Surcharges

Interest is charged on overdue tax, currently at 3% per annum, and this also applies to extended payment arrangements. For liabilities due by 31 July 2018, if no payment arrangement is in place, surcharges based on the amount of tax outstanding (in addition to interest) will be added to any liabilities still unpaid at the following dates:

    1. an initial 5% on 1 September 2018
    2. a further 5% on 1 February 2019
    3. a final 5% on 1 August 2019.

If you need any advice or assistance with your tax liabilities or alternatively would like to discuss any of the above please contact our Tax Director Jenny Marks.

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