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January 14, 2022

Self Assessment: HMRC Temporarily Waives Late Filing and Late Payment Penalties

The 31 January 2022 deadline for taxpayers to file their 2020/21 tax returns is quickly approaching. In light of this, HMRC announced on 6 January 2022 that late filing and late payment penalties will be waived for one month for Self Assessment taxpayers who are yet to submit their 2020/21 tax returns.

The announcement was made as a result of the extra pressures taxpayers and their agents are facing this year with COVID-19. HMRC have acknowledged that COVID-19 could be affecting some taxpayers’ ability to file their tax returns by the 31 January deadline.

Although, official HMRC department figures at the date of the announcement show that out of the 12.2 million taxpayers who are required to submit a tax return, nearly 6.5 million taxpayers had already submitted their 2020/21 tax returns in advance of the statutory deadline.

HMRC have made it clear that despite the newly announced penalty waivers, the 31 January 2022 deadline for 2020/21 tax returns is still applicable, and HMRC are encouraging all taxpayers to meet this deadline where possible.

Filing your Return

Generally, where a taxpayer misses the 31 January filling deadline to submit their tax return, HMRC impose an automatic £100 late filing penalty (even where no tax is due).

However, HMRC have introduced a late filing penalty waiver for 2020/21 tax returns, which could result in less of a financial burden for taxpayers when it comes to submitting their tax returns late. In particular, the late filing penalty offers the following relief to taxpayers who submit their tax return after the deadline:

  • Providing that your 2020/21 tax return is submitted within the month after the 31 January deadline (i.e. by 28 February 2022), you will not receive the automatic £100 late filing penalty.

The waiving of the penalties for late submission of tax returns will also apply to Partnership Tax Returns (SA800) and Trust and Estate Tax Returns (SA900). Taxpayers who have filed their paper return late (which had a separate deadline of 31 October 2021) will still be charged a late filing penalty.

Paying your Tax

Further to waiving the above late filing penalty for an additional month, HMRC is also waiving the initial late payment penalty. Previously, where a taxpayer fails to pay their tax liability within 30 days of the 31 January deadline, they will generally be subject to a penalty of 5% of the unpaid tax. However, this penalty waiver will mean that:

  • Taxpayers who cannot pay their 2020/21 tax liability by 31 January 2022 deadline will not receive this late payment penalty on 03 March 2022 if they pay their tax bill in full, or they sent up a time to payment arrangement by 01 April 2022.

However, it is worth noting that interest will still be payable on any outstanding tax due from after the statutory deadline (i.e. from 1 February 2022). Therefore, it is still advisable to pay the tax on time if possible, to avoid paying any interest charges at the current rate of late payment interest of 2.75% of the outstanding tax liability due.

Time to Pay Arrangement

As discussed above, HMRC offer a Time to Pay Arrangement which allows taxpayers to spread the cost of their tax bill over a period of time. Therefore, for those still struggling to pay their tax bill after the announcement of these waivers, a Time to Pay Arrangement can be set up after their tax return has been filed.

For Self Assessment tax liabilities of no more than £30,000, you can speak with HMRC about setting up a payment plan here on the GOV.UK website.

If you have a Self Assessment bill of over £30,000, or you need your tax bill to be spread over more than 12 months to pay the liability, you may still be able to set up a Time to Pay Arrangement by calling the Self-Assessment Payment Helpline on 0300 200 3822.

If you have any queries on any of the information in this article, or need help with the filing of your tax returns, please do not hesitate to get in contact with a member of the team for expert tax advice.

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