One in four unable to pay ‘unaffordable’ tax bills due on Jan 31

Tens of thousands of sole traders and company directors have amassed huge debts with HM Revenue & Customs and are struggling to pay tax bills due at the end of the month.

Close to 25,000 taxpayers with bills due on Jan 31 have asked to spread £ 69m in payments over 12 months. This is since HMRC made it easier to apply for debt management plans in October.

They join hundreds of thousands of others who already use the “Time to Pay” scheme, which now handles billions in tax due.

A quarter of selfemployed workers plan to delay paying, according to polling from consumer group Which?. Many face paying much more than normal, with one in five already deferring unaffordable payments on account bills originally due in July 2020. These must now also be cleared by the end of the month. One in six said they had no idea how they would cover their tax bills.

While self- employed income collapsed last year, the bills now due relate to the 2019-20 tax year.

In July the taxman did not apply interest to deferred payments, but those delaying again will pay interest rates of 2.6pc. Those who fail to pay by Jan 31 without an agreed payment plan will face an immediate late payment fine of £100 and additional penalties.

Tax experts fear a rise in the number of late filers this year, as people focus on steering businesses through the pandemic and accountants struggle to process an unusually large workload. More than one million people filed late last January before the pandemic began, triggering £100m-plus in penalties.

HMRC has said it will be lenient to those who miss the deadline and will accept coronavirus as a reasonable excuse for being late and waive fines. It has also extended the appeals window by three months to April.

However, it has so far refused calls to go further, such as putting a pause on fines, waiving interest payments or pushing back the Jan 31 deadline. Accountancy bodies have said effectively waiving fines but forcing firms to appeal will needlessly swamp businesses with yet more bureaucracy.