Tax payment deferral could be a risky move

EVERYONE who has a tax bill due at the end of this month has a decision to make: To pay or not to pay?

The Government said that it would allow taxpayers to defer payments to HMRC that are due at the end of July until January next year, and many taxpayers – especially those who have noticed a substantial drop in earnings over the last few months – will have had the decision made for them because they don’t have the money to make the payment that is due.

Another group of people will have to make a choice to pay one creditor rather than another.

“Pay the mortgage and I can’t pay my tax,” or, “Pay HMRC and I’ll have to take a holiday on the car loan.”

There will be another group of people, probably much smaller than the first two, who have a different decision to make.

This group will have the money to pay their tax but might be thinking they won’t bother because the Government told them they don’t have to. Instead, they will leave the money in the bank until January and pay the tax then.

Or, they will go and spend it on something else because they have plenty of time to save it up again before January next year.

To all the groups out there, and to anyone else I’ve missed out who hasn’t decided whether to pay their tax, I would advise caution and careful thought before a decision is made.

Any tax that you don’t pay in July will have to be paid in January – and we don’t really know what is going to happen between now and then.

Things could get better, or they could get worse.

And we don’t know how HMRC will react if you have to tell them in January that not only can you not pay tax due then but you can’t make up what you owe from July.

They might say, “It’s fine, you can take as long as you need”, or you might find you are facing fines and penalties as soon as the tax payment is late.