Those who have already submitted their self-assessment tax return for the year to 5th April 2020 and paid the related tax liability, will be now be relieved that they are up to date and there is nothing further to do before the 31st January 2021 deadline.
Those who still need to submit their self-assessment tax return now only have a few days left to submit a return, and settle any tax liability due, to avoid penalties and interest. Despite recent announcements about HMRC taking a more lenient approach towards people who file after 31st January for COVID-related reasons, it is worth bearing in mind that penalties will still be issued automatically and the penalties will need to be appealed before being waived. As the tax return will still need to be filed - and getting the penalty overturned is not guaranteed - it is far more efficient to simply get the return filed on time. HMRC have said they want to encourage as many people as possible to file on time even if they can’t pay their tax straight away.
Penalties for Late Payment
You will receive a penalty of £100 if your tax return is up to 3 months late and you will have to pay more if it is later, or if you pay your tax bill late. If your tax bill is not paid by 31st January 2021, interest will be charged, currently at a rate of 2.60% per annum. In addition, you should also be aware that if the final payment, in respect of your 2019/20 liability, remains unpaid at 1st March 2021 then a late payment penalty will be levied equal to 5% of the tax remaining unpaid. This charge will also be subject to interest at 2.60% per annum.
‘Time to Pay’ Arrangements
You can now apply online for additional support to help spread the cost of your tax bill into monthly payments without the need to call HMRC. The online payment plan service has been increased to £30,000 for Self-Assessment customers. Once your tax return for the 2019/20 tax year is submitted, you have the option of using the online self-serve ‘Time to Pay’ facility through GOV.UK to set up a direct debit and pay any tax that is owed in monthly instalments, up to a 12-month period.
If you wish to set up your own self-serve Time to Pay arrangements, you must have no outstanding tax returns, no other tax debts and no other HMRC payment plans set up. The debt needs to be between £32 and £30,000 and the payment plan needs to be set up no later than 60 days, after the due date of a debt. Interest will be applied to any outstanding balance from 1 February 2021.
Where your Self-Assessment debts are over £30,000, or you need longer than 12 months to pay your debt in full, you may still be able to set up a Time to Pay arrangement by calling the Self-Assessment Payment Helpline on 0300 200 3822.
Important: Please note that any Time to Pay arrangements, whether made online or over the phone, cannot be arranged by your accountant as an agent and must be arranged personally by the taxpayer.
