Certain contributory benefits can be negatively impacted if payments made under a Time to Pay arrangement with HMRC are not allocated correctly.

  • Due to Coronavirus, taxpayers were permitted to Defer making their July 2020 payment on account until 31 January 2021, with the following sums then becoming due:
    • Second 2019-20 payment on account (usually due 31 July 2020).
    • 2019-20 balancing payment, including Class 2 National Insurance.
    • First 2020-21 payment on account.
  • Those struggling to make payment of tax debts by the due date are able to set up a Time to Pay agreement with HMRC, which can avoid Late payment penalties being charged.  
  • Payments made under a Time to Pay agreement are usually allocated to the earliest debt first.
    • This means that 2019-20 Class 2 National Insurance Contributions may not be deemed paid until after the 31 January 2021 deadline. This can have a detrimental effect on certain contributory benefits claimed.
  • Affected taxpayers should contact HMRC as soon as possible so that amounts already paid can be allocated against the Class 2 National Insurance liability and protect any contributory benefit claim. 
    • This reallocation of payments can result in slightly more interest being payable.   

Useful guides on this topic

Time to Pay agreement
Business and self-employed taxpayers with outstanding tax liabilities may be eligible to receive support with their tax affairs through HMRC’s Time To Pay service.

National Insurance: what's the maximum payable?
Where individuals have multiple employments and/or self-employment there is a limit to the National Insurance Contributions (NICs) that are payable. 

Penalties: Late Payment
What penalties are charged when tax is paid late? 

COVID-19: Government support tracker
This tracker covers measures announced by the government to support individuals and businesses, as we get through COVID-19. 


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