What is an HMRC Budget Payment Plan?

Are you self employed and looking for a more flexible way to pay your taxes?

If so the Budget Payment Plan (BPP) might be the perfect solution for you.

This voluntary plan offers an easy and flexible approach to paying your taxes allowing you to set up regular payments to the HM Revenue and Customs (HMRC).

It’s a great way to manage your finances and ensure that your tax obligations are met on time.

Who can use an HMRC Budget Payment Plan?

The BPP is a service offered by HMRC to help self employed individuals manage their income tax payments.

To be eligible to use the budget payment it’s essential that your past self assessment payments are all paid and not overdue.

If you’ve failed to meet a self assessment payment due date (or are aware you won’t be able to make a timely payment) there’s a different payment option available called time to pay which lets you settle your most recent self assessment tax bill in multiple payments.

What does a BPP offer?

This voluntary method of tax payment is designed to make the process of paying taxes easier and more manageable for self employed individuals.

Under the BPP you can:

• Opt for weekly or monthly payments to the HMRC.
• Decide on the regular amount to be transferred.
• Change the amount you pay.
• Pause your payments for up to six months.
• Terminate your BPP at any time.

How to set up your Budget Payment Plan

To set up your BPP you will need to use your HMRC online tax account.

Once logged in navigate to the direct debit section in the menu of your account and select the option for the budget payment plan.

Fill out the direct debit form and specify the amount you wish to have deducted (weekly or monthly).

To complete the direct debit process you will need an 11 character payment reference which is made up of your 10 digit unique taxpayer reference (UTR) followed by letter ‘K’ at the end.

What happens if I still owe tax?

While the BPP simplifies tax payments for self employed individuals there may be instances where your weekly or monthly deductions are insufficient to cover your tax obligations in full.

In such cases you will need to pay the remaining amount to HMRC before the self assessment deadline to avoid penalties.

If you need to as part of the budget payment plan HMRC let you pause payments for up to six months.

Can you pay BPP payments by cheque?

Yes, you can!

If you prefer to pay by cheque you can send them to the following address:

HMRC

Direct

BX5 5BD

When making payments or sending cheques to the HMRC ensure you address them to the ‘HM Revenue and Customs only.’

Additionally you will need to include your unique taxpayer reference (UTR) number with the letter K at the end on the back of your cheque.

Does the Budget Payment Plan save tax?

While the BPP offers numerous advantages to taxpayers it isn’t set up to reduce the amount of income tax you owe.

The plan simply allows you to manage your funds and make regular payments, independent of the self assessment payment deadlines.

However, this doesn’t reduce the amount of income tax you owe to HMRC.

Essentially the budget payment plan is a tool to help you manage your taxes and facilitate regular payments not to reduce your tax liability.

Not sure which payment option is best for you?

If you’re not sure which self assessment payment plan is best HMRC let you check by answering a few quick questions online.

To avoid making an application for an incompatible plan it’s worth running through the payment plan checker to double check.

HMRC Time to Pay

HMRC offers a ‘time to pay’ solution which is different to a budget payment plan to assist both individuals and businesses in repaying their debt in small, manageable instalments over a specified timeframe.

The time to pay system is available to individuals with income tax debts and to businesses facing bills related to income tax, VAT, corporation tax and PAYE.

To qualify for a ‘time to pay’ agreement with HMRC certain requirements must be met and HMRC must be contacted within defined deadlines.

Significantly using the ‘time to pay’ system can help avoid unnecessary penalties and interest charges from HMRC for late income tax payments.