Hundreds of thousands of taxpayers will get an extra month to make a payment due on Sunday and escape penalty because HM Revenue & Customs (HMRC) ran out of paper.

Around 3.6 million taxpayers who file a self-assessment return must make a payment by 31 July. This is the second 'payment on account' for the 2010-11 tax year.

Key Points

  • 500,000 did not receive June reminder as HMRC ran out of paper
  • They'll get extra 30 days to pay
  • Everyone else due to pay must make payment on account by 31 July

But up to 500,000 were not sent a reminder in June because HMRC had no paper left to send the statements on (update, 26 July, 2pm. HMRC has revised the number it says are affected from 200,000 to 500,000, so we've tweaked the story).

The Revenue says anyone who did not get a statement will have an extra 30 days from when the paperwork arrives to cough up the cash before it adds interest. It adds that these statements will be sent "as soon as possible".

An HMRC spokesman says: "This in no way prevents the accurate payment of tax and no-one will be out of pocket as a result. Account information can be viewed online so it isn't necessary to wait for a paper statement.

"We very much regret any inconvenience and will send paper statements to everyone who should have one as soon as possible."

Who has to make a payment on account?

Only those whose previous year's tax bill was more than £1,000 have to make payments on account, unless more than 80% of the previous year's liability was deducted by an employer (applicable to those who do extra work on top of employed work).

There are 9 million taxpayers who need to file a self-assessment form every year but fewer than half of those need to make a payment on account.

How the payment on account is calculated

Those who filed a 2009-10 tax return would have had to return it, and pay any outstanding tax for that year, by 31 January this year.

But most would also have been asked to make an additional two payments towards their 2010-11 bill, each known as a payment on account.

The first installment was due on 31 January and the second is due by the end of this month.

Each payment is half of your previous tax year's bill. So if you paid £10,000 tax in 2009-10 you'd have owed £5,000 on 31 January and the same amount by 31 July.

If you don't/can't pay

If you miss the deadline you'll pay interest on the outstanding balance at a 3% annual rate.

If you can't pay, the Revenue says you should call it on 0845 366 1204.

You can choose to lower your payment on account if you earned less in 2010-11 than in 2009-10.

However, if after filing your 2010-11 return, you still owe money, you'll face interest charges on the difference.