Update – 19 February 2021 – HMRC have announced that
Self-Assessment taxpayers will not be charged the 5% late payment penalty if
they pay their tax or set up a payment plan by 1 April 2021.
Following HMRC's announcement, the remaining 1.8 million people who were unable to file their return on time will not receive a late filing penalty notice, provided the return is filed online by 28 February 2021.
If you have missed the 31 January 2021 filing deadline, we recommend you file your return online by 28 February 2021 to avoid a £100 late filing penalty. For tax returns filed after 28 February 2021, further late filing penalties, including daily penalties from three months, as well as six and twelve month penalties, will operate as usual.
If you are unable to submit your return by 28 February 2021, you may have grounds to appeal the late filing penalty notice issued by HMRC if you have a reasonable excuse for late filing. You can appeal the penalty online or by post within 30 days of the date of the penalty notice.
There were no changes to statutory obligations, therefore, taxpayers were still obliged to pay their tax bill by 31 January 2021 and interest will be charged from 1 February 2021 on any outstanding tax liabilities. The current rate of interest is 2.6% per annum.
Any unpaid tax in respect of the 2019/20 tax liability that remains outstanding as at 3 March 2021 will incur a 5% late payment penalty. You would therefore need to settle any unpaid tax on or before 2 March 2021 to avoid a late payment penalty. Further late payment penalties are charged at six and twelve months.
If you are unable to pay your tax bill, you should contact HMRC to discuss setting up a payment plan. Self-Assessment taxpayers with tax bills up to £30,000 will be able to benefit from a payment extension through HMRC’s online self-service ‘Time to Pay’ facility, allowing them to secure a plan to pay over an additional 12 months. Further information can be found here.
Interest will still be charged under the payment plan, however, any late payment penalties will be mitigated provided you continue making payments under the terms of the payment plan.
Those with bills above £30,000 that are unable to pay will need to contact HMRC’s Time to Pay Self-Assessment helpline to agree a payment plan. HMRC will consider each person on a case-by-case basis, based on their financial position and circumstances.
Taxpayers should also review their projected liability for their 2020/21 tax return and whether it is possible to reduce their 2020/21 payments on account. Payments on account are based on the previous year’s tax liability (eg 2020/21 payments on account are based on the tax liability for 2019/20 tax year), therefore, where businesses are expecting reduced taxable profits for the 2020/21 tax year a claim to reduce the 2020/21 payments on account can be made to HMRC.
It is worth noting that businesses or individuals that have received support grants, including Self-Employment Income Support Scheme payments, should factored these into their calculations as they will be subject to tax.
Our tax compliance teams, located in our regional offices, are in a position to help if you require any assistance with the completion of your 2019/20 tax return, further details of the penalty regime and/or appeals.