In the 6 months since 5 April this year, 21,600 people with self-assessment tax bills have set up a time-to-pay arrangement to spread the cost. That’s up 3,900 or a fifth in a year.
It’s a drop in the ocean of the total number likely to sign up this tax year. The interest rate payable on these debts has risen from 3.25% to 5.5% since April.
HMRC has published figures on the time-to-pay scheme for self-assessment taxpayers: Online payment plans help almost 21,600 customers pay their Self Assessment bill – GOV.UK (www.gov.uk)
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown said: “The enormous pressure on taxpayers is taking a toll, with thousands of people already realising there’s no way they’ll be able to afford their tax bill in January. The horrible truth will dawn on tens of thousands more of them in the coming months, and they’ll have to pay far more in order to spread the cost.
HMRC has released details of people who have signed up to the time-to-pay scheme. This allows those who can’t afford their tax bill to spread the cost over the following 12 months. On the one hand this can be a lifeline for self-employed people. They’ve been clobbered by everything from pandemic cancellations to runaway bills, and are now staring recession in the face, so an awful lot of them need all the help they can get.
On the other hand, the fact that so many taxpayers need help is a worry. Already 21,600 have signed up in the first six months of the tax year, and we know that the number using it tends to ramp up dramatically over the last six months of the tax year – especially as the self-assessment deadline approaches. Last year, 17,700 people had signed up by November, and by April almost 142,000 had done so. If we follow the same sort of pattern this year, we could see over 170,000 needing this help by next April.
To make matters worse, they’re paying more for the privilege. The interest rate on these debts is linked to the Bank of England base rate, so it has been ramping up as rates rise. At the start of this year it was 2.75%, by April it hit 3.25%, and from 22 November it will stand at 5.5%. Given that these taxpayers were already in difficulty, this is the last thing they need. Somehow they have to pay off existing debts, cover higher interest charges, and still find the cash to put aside for their tax bill next year. There’s a risk that this proves too much of a challenge, and it could help push their finances to breaking point.
If you have a tax return to complete for January, it’s worth getting stuck in as early as possible. This not only gives you more time to work out how you’ll afford to pay the bill, it also gives you the time to make sure you’re claiming for everything possible – from expenses to pension tax relief and gift aid – which could help keep your bill under control.”