In January 2021, HMRC announced that, as a one-off measure for the 2019/20 tax year, it would be possible to submit your Self Assessment tax return as late as midnight on 28 February 2021 without incurring a penalty.
HMRC later announced that those that use Self Assessment won’t be automatically charged an initial 5% late fee if – before 1 April 2021 – they either pay their taxes, or contact HMRC to create a Time to Pay arrangement to pay the bill in instalments.
HMRC says these measures are because of the “immense pressure that many people are facing in these unprecedented times”.
In this article, we cover what this means for you and the steps you can take now:
Can I pay my 2019/20 tax late?
All those registered for Self Assessment should have paid their tax by 31 January.
If you didn’t then, in theory, an automatic 5% late-payment penalty is applied. Additionally, interest starts to accrue from 1 February onwards.
However, HMRC announced in mid-February that the 5% penalty would not apply provided one of two things occurs before 1 April 2021:
- You pay your Self Assessment tax bill.
- You setup a Time to Pay plan.
Notably, interest will still continue to accrue even though the penalty doesn’t apply. However, at a rate of 2.7% on the amount you owe, this shouldn’t be a significant burden if either of the two options are applied before 1 April 2021.
Time to Pay is an arrangement that can be reached with HMRC where you agree to pay your taxes late, by instalments. You don’t necessarily have to speak to anybody at HMRC, and can set up a payment plan online. But you do need to take action and it isn’t automatically applied.
To use Time to Pay, you need to owe £30,000 or less, and your tax returns must be up to date. You also can’t have any existing payment plans or debts with HRMC.
As well as the above, you shouldn’t forget that it may be possible to spread the tax bill payment across 2021 in monthly payments.
This existing measure is part of the government’s recent Winter Economy Plan, in response to the coronavirus disruption. More than 25,000 people have already used this service.
Contact HMRC via its Self Assessment Payment Problems helpline (0300 200 3822) to see if you can set up payment by instalments, and request a Time To Pay plan as per the Winter Economy Plan announcement.
If you’re eligible, you can also apply online.
But you must do so within 60 days of 31 January 2021. That means the deadline is again 1 April 2021.
As above, the payments can only be spread across instalments in this way if you owe £30,000 or less, have no other outstanding tax bills, and are not already making use of an HMRC payment plan.
However, if any of these apply then you can still phone HMRC to discuss potentially using Time to Pay at its discretion.
What was the extension?
In January 2021, HMRC made it clear that those who could meet the 31 January deadline to submit their 2019/20 Self Assessment tax return should have done so.
If this deadline was missed by up to three months then – ordinarily – you’d incur an automatic fine of £100. There are larger fines if your Self Assessment tax return is submitted even later than this.
Sometimes the fines are waived if you’ve a good excuse for filing late, but that involves speaking to HMRC first and making your case.
HMRC’s announcement meant that, for the 2019/20 tax year’s Self Assessment return, it was waiving the mandatory £100 fine – provided the return was submitted online by midnight on 28 February 2021.
In other words, it wasn’t accurate to say HMRC had extended the deadline. It was just not fining those who submitted up to a calendar month late.
As such, there was no need to apply to HMRC to make use of this measure, or seek permission first. You simply had to submit your 2019/20 Self Assessment return by 28 February 2021 if you wished to avoid fines.
Read more about Self Assessment
- Allowable expenses to add to your Self Assessment tax return
- How to file a Self Assessment tax return online: A step-by-step guide
- 7 tips to get your Self Assessment tax return right
- How to make Self Assessment less stressful for your practice
- 7 top tips for filing your Self Assessment tax return
Why has HMRC made these decisions?
HMRC has been monitoring the number of Self Assessment returns coming in, in light of the coronavirus disruption.
It says it is “increasingly clear from the filing rate that some taxpayers and agents cannot file on time”.
The advice from both HMRC and accountants is always to submit your Self Assessment well ahead of time, and ensure you pay your taxes on time.
Considering that most people using Self Assessment have all the information they need at the end of the tax year each April, waiting until 31 January the following year is considered to be taking an unnecessary risk.
However, in these extraordinary times, it’s clear that normal patterns have been disrupted.
The announcement of the easing of the late penalty until 28 February 2021 was just what many people needed, and the removal of the 5% penalty will be welcome by others paying their bills a little later than they would like.
Editor’s note: This article was first published in January 2021 and has been updated for relevance.
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