Landlords Warned Be Careful About Deferring Tax – Pay Up If Possible
Many landlords are suffering financial hardship because of Covid-19 and have been told by the chancellor that they are able to defer their July tax payment on account.
However those who are able to afford to pay now are being advised they should do so as they will have to face the double whammy of paying next year’s January tax on top of July’s.
The majority of self assessment tax payers make two payments in a calendar year in January and July known as ‘payments on account’.
There isn’t an application process for those wishing to defer their payment as it is classed as an automatic offer without incurring any penalties or extra interest charges for the ‘late’ July payment, if paid by January 31st 2021.
However tax payers are being urged to pay now if they can afford to.
Andy Sanford, a partner at a tax and advisory firm, said: “Many taxpayers will be taking advantage of the self-assessment tax holiday that they were given. However, this is a tax deferral measure, rather than a relief and this will have to be paid in January.”
Stanford explains that there are three types of tax payers for whom it is not necessarily a good option to take a tax holiday.
He said: “If you are a partner in an LLP or partnership, and your firm makes your tax payments for you, then you are risking that the firm will be sufficiently solvent to make the payment in January.
“The tax liability is the responsibility of the individual, so if you have any concerns, you should really press for the tax bill to be paid in July.”
He continued: “The second group of taxpayers are those who are ‘spenders’. They should bear in mind, that in the first three months of 2021, the self-employed will have to make not only two self-assessment payments, but also make two VAT payments, catching up on the deferred VAT payment from earlier this year. This will require careful budgeting. For some it may be simpler to pay the liability now if there is spare cash.”
“Finally, there are a group of taxpayers, who may have either been unaffected, or in an industry that has seen an increase in trade through the pandemic. They may simply feel it is not right to take advantage of the deferral.
“For those who are fearing double tax payments in January, consider getting your tax return finished early this year. Not only will it determine your tax liability for the tax year 2019/2020, but it will also be a sensible point to see if payments on account can be reduced for the 2020/2021 tax year.”