By Rosy Hughes, Head of Private Client Tax
For the second successive year HM Revenue and Customs (HMRC) has waived penalties on late self-assessment tax returns for a month after the original deadline of Monday 31 January.
This is a move to relieve pressure brought by Covid-19 and give businesses, individuals and tax advisers financial breathing space.
According to HMRC, 6.5 million customers out of 12.2 million have already filed their tax returns for the 2020-21 financial year – but the remaining 5.7 million are still yet to file!
Fines will not be enforced on any one individual or businesses that file by February 28 – a move which would typically result in an automatic £100 penalty.
The deadline for late tax payments has also been extended until Friday, April 1. The late payment penalty is usually equal to five per cent of the outstanding tax. That means that by this date businesses will need to have either paid outstanding tax or set up a Time to Pay arrangement with HMRC.
Time to Pay arrangements are available after filing a 2020-21 tax return, and an online payment plan can be arranged with HMRC to spread self-assessment payments of up to £30,000 over 12 monthly instalments.
Still hit January 31 if you can!
While this breathing space will be a great relief for businesses, individuals and tax advisers alike – we would still recommend that you hit the original self-assessment tax return deadline if you can.
The deadline may have been extended, but you can still be charged interest on any tax that hasn’t been paid by January 31. This will be charged at a rate of 2.75 per cent.
There may be an impact on self-employed people who claim certain contributory benefits on National Insurance Contributions (NICs) if payments are made after January 31, so make sure those Class 2 NICs are paid on time in order to make sure these contributory benefit claims remain unaffected.
It’s always a good idea to get the returns in early, in case HMRC has any questions and issues that will need to be resolved with your return.
Why have HMRC made these extensions?
HMRC has recognised the significant pressure that the latest variant of Covid-19 has put on businesses, agents and individuals over the past couple of months.
Businesses are already under enough pressure with trying to rebuild in a time of on-going crisis, and to hit those businesses with further fines and penalties would have been an unnecessary strike.
To extend these deadlines wasn’t a move predicted by commentators, particularly as HMRC extended the deadline in 2021 too.
But, this isn’t a selfless measure by HMRC – it will certainly ease pressure on them as well! With more than 5 million self-assessment tax returns yet to be filed, they would likely have received the vast majority of these tight to the deadline.
How can we help?
Our expert tax team can guide you through submitting self-assessment tax returns and ensure that you avoid any unexpected penalties or charges.