Self Employed: Do you plan to defer your payment on account?

Is there any reason to defer the upcoming payment on account?

Payments on account are advanced income tax and national insurance contribution payments made by the self employed or sole traders each year, on 31 July.  

In light of the current COVID-19 situation, the government announced a voluntary suspension of the payment of account, deferred to January 2021.

The government guidance states that deferment can be considered if ‘you are having difficulty in making the payment due to COVID-19 ’ or payment can be made as usual if you so wish.

Should I defer my payment on account?

To be clear, you do not have to inform HMRC if you decide that you do want to defer your payment on account - it is an automatic deferment.

However, if you are in a strong cash flow position and can afford to pay, it might be wise to do so rather than waiting till the deferment date of 31 January, when you will additional tax liabilities.

Your January 2021 income tax and national insurance contribution liabilities for 19/20 and the first payment of account for the new tax year will also be due. You will need to be comfortable that you could also pay the 31 July deferred payment on account on top of these two payments.

If you do decide to defer for whatever reason we strongly suggest you keep contemporaneous records to show the reasons for the deferment against any later query that may arise from HMRC.

Please get in touch if you would like further guidance.