Time to Avoid a Penalty

Are you one of the 1,790,368 taxpayers who missed the tax return filing deadline? Great news - HMRC have confirmed that the £100 late filing penalty will be waived for tax returns filed by 28 February 2021. And if you are struggling to pay your January 2021 tax bill, there’s help for you too.

Last week HMRC announced that they will not be charging a penalty for a tax return filed late provided it is filed by 28 February 2021. Although it’s worth noting, the return will still be deemed as late and therefore the enquiry window will be extended to the anniversary of the quarter day following the submission, ie 30 April 2022 and you may need to check your tax enquiry insurance will remain valid. Our provider has confirmed the cover will remain in place.

This is a big help for many and will avoid some panic but the removal of the penalty does not mean the payment due date has been changed. The balance for the 2019/20 tax year and first payment on account for 2020/21 were still due for payment on 31 January 2021. So if you haven’t paid your tax already and you are unable to pay this right now, interest will accrue from 1 February 2021 until paid, at a rate of 2.6%, even though you will not be charged an immediate penalty. The first 5% late payment penalty will come into charge on any tax due for 2019/20 that remains unpaid on 3 March 2021, unless action is taken.

Therefore, if you are experiencing difficulty paying your tax, fortunately HMRC have put in place an improved (albeit the phone line is often busy) Time to Pay arrangement enabling you to spread your January 2021 tax bill over a period of up to 12 months without incurring any late payment penalties, provided you apply in time, but do note that interest at 2.6% will still be charged.

The criteria to apply is shown below:

1. You must not have any outstanding tax returns

2. You must not have any other tax debts

3. You cannot have any other HMRC payment plans in place

4. The debt needs to be between £32 and £30,000

5. The payment plan needs to be set up no later than 60 days after the payment due date

You can follow the link below to set up a payment plan online or you can call their helpline https://www.gov.uk/pay-self-assessment-tax-bill/pay-in-instalments

Even if you don’t meet the above criteria you should still call the Self Assessment Payment Helpline on 0300 200 3822 to discuss your options.

If you do need to file your return after 28 February 2021, you should send an appeal to HMRC at the earliest opportunity once you have filed your tax return provided you have a ‘reasonable excuse’ such as coronavirus related difficulties.

FUSE is an independent Chartered Certified firm of accountants and tax advisors based in Highgate Village, North London. We provide a dynamic range of services to clients working in property, media, entertainment and professional services. Our clients vary in size from self employed sole traders, small enterprises and medium size businesses. We believe that comprehensive financial planning and sound business financial advice are the keys to growth and profitability.