Self assessment taxpayers get more time as Covid-19 pressures continue

HM Revenue and Customs (HMRC) has announced it is waiving late filing and late payment penalties for self assessment taxpayers for one month.

The move will give them extra time, if they need it, to complete their 2020 to 2021 tax return and pay any tax due.

It says it has made the decision to give the extra time because it recognises the pressure taxpayers and their agents are facing.

Normally, late filing penalties are applied to all returns due on, but filed after, the January 31, 2022, deadline.

Those penalties are cancelled if the taxpayer has a reasonable excuse for filing late.

However, this year, like last year, HMRC is not charging late filing penalties for a month to help taxpayers and agents who are unable to meet the deadline.

The move means that late filing penalties will not be charged for online tax returns received by February 28, 2022.

The payment deadline for self assessment is January 31 and interest will be charged from February 1 on any amounts outstanding.

Normally a five per cent late payment penalty is charged on any unpaid tax that is still outstanding on March 3.

However, this year, like last year, HMRC is giving taxpayers more time to pay or set up a payment plan.

Self assessment taxpayers will not be charged the five per cent late payment penalty if they pay their tax or set up a payment plan by midnight on April 1, 2022.

They can pay their tax bill or set up a Time to Pay arrangement online at GOV.UK.

As interest will be payable from February 1, as usual, it is still better to pay on time if possible.

HMRC has revealed that of the 12.2 million taxpayers who need to submit their tax return by January 31, almost 6.5 million have already done so.

Angela MacDonald, HMRC’s deputy chief executive and second permanent secretary, said: “We know the pressures individuals and businesses are again facing this year, due to the impacts of Covid-19.

“Our decision to waive penalties for one month for self assessment taxpayers will give them extra time to meet their obligations without worrying about receiving a penalty.”

The existing ‘Time to Pay’ service allows any individual or business who needs it the option to spread their tax payments over time.

Self assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.    

The 2020- 2021 tax return covers earnings and payments during the pandemic.

Taxpayers need to declare if they received any grants or payments from the Covid-19 support schemes up to April 5, 2021, as these are taxable.

They include:

• Self-Employment Income Support Scheme
• Coronavirus Job Retention Scheme
• Other Covid-19 grants and support payments such as self-isolation payments, local authority grants and those for the Eat Out to Help Out scheme

The £500 one-off payment for working households receiving tax credits should not be reported in self assessment.

Since April last year, more than 30,000 taxpayers have used the self-serve Time to Pay service, which is done online with no need to call HMRC, to manage their self assessment liabilities, totalling around £75 million.

Taxpayers who are required to make Payments on Account, and know their bill is going to be lower than the previous tax year, for example due to loss of earnings because of Covid-19, can reduce their Payments on Account.

Visit GOV.UK to find out more about Payments on Account and how to reduce them.

Self-employed taxpayers who need to claim certain contributory benefits soon after January 31, 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time.

This is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 Balancing Payment that is due to be paid by January 31.

• To discuss any tax issues you may have please contact us on 01772 430000