The Self-Assessment Payment Plan is an online scheme set up by HMRC to pay any outstanding tax liabilities in full or to set up an online payment plan to avoid a 5% late payment penalty. Once setup, taxpayers have the option to pay online, by post or via your bank in a time period that suits them over 12 months.

After the deadline passed to set up the Self-Assessment Payment Plan on midnight of the 1st April 2021, taxpayers will incur:

A 5% late payment penalty will be charged if tax remains outstanding (Further late payment penalties are charged at 6 and 12 months on tax outstanding where a payment plan has not been set up).

An additional interest charge on late payment. The current rate of late payment interest is 2.6%.

If Self-Assessment taxpayers know their 2020/2021 tax bill is going to be significantly lower than their 2019/2020 tax bill (e.g. loss of earnings due to COVID-19) they can choose to reduce their payments.

The first instalment of self-assessment is usually to be submitted by 31st January (although this was extended in 2021), with the second instalment by 31st July. This second payment deadline relates to when a person chooses to make advance payments towards their bill (known as ‘payments on account’). If this is late then a penalty will be handed out, which can be appealed against if the person has a reasonable excuse.

All information on how to apply for the Self-Assessment Payment Plan and paying your tax bills in instalments can be found at the dedicated government portal page.