31 January self-assessment deadline approaching

There are a number of key tasks that you need complete by midnight on 31 January 2021. These include filing the self-assessment tax return for 2019/20, paying any remaining tax due for 2019/20 and, where applicable, calculating and paying the first payment on account for 2020/21.

Filing deadline

The deadline for filing the 2019/20 tax return online is midnight on 31 January 2021. If you received a notice to file a return which was issued after 31 October 2020, a later deadline applies, and you have three months from the date of that notice in which to file your return. The deadline for filing paper returns (31 October 2020) has already passed. While any paper returns filed after that date (or more than three months from the date of notice to file a return, if later) will attract a late filing penalty, the penalty can be avoided by filing your return online by midnight on 31 January 2021.

If you miss the filing deadline, you will receive an automatic late filing penalty of £100. This is the case regardless of whether you have any tax to pay. Further late filing penalties are charged where the return remains outstanding after three months, six months and 12 months.

Do I need to file a return?

You will need to file a tax return if HMRC have sent you a notice requiring you to file one. You will also need to register for self-assessment if you have not already done so and file a tax return for 2019/20 if in that year you had taxable income that was not taxed at source. This might include:

income from self-employment of more than £1,000;
money received from renting out a property;
savings income, such as interest or dividends;
foreign income; or
capital gains.

You might also need to fill in a tax return if you have income tax reliefs that you wish to claim, although this will not always be the case as some, for example, relief for employment expenses, can be claimed online.

Paying tax

You must pay any tax owing for 2019/20 plus the first payment on account for 2020/21 by 31 January 2021. As a result of the COVID-19 pandemic, you may find that your bill is higher than normal this year if you opted to delay making the second payment on account for 2019/20. If you are struggling to pay your bill, you may be able to pay in instalments.

If you filed your tax return by 30 December 2020, have PAYE income and owe £3,000 or less, the tax that you owe can be collected through PAYE by adjusting your 2021/22 tax code.

Tax due for 2019/20

Unless you have agreed a Time-to-Pay arrangement with HMRC, you will need to pay any tax that you owe for 2019/20 by 31 January 2021. Remember, to take off any payments that you have already made when working out what you need to pay – the HMRC tax calculation does not do this automatically. If you are unsure what payments have been made, you can check this by looking at your personal tax account.

If you opted to delay your second payment on account for 2019/20 (which would have normally been due by 31 July 2020), you will need to pay this by 31 January 2021, along with any balance that remains outstanding. As long as you pay the delayed payment by this date, there will be no interest to pay.

First payment on account for 2020/21

You will need to make payments on account of your 2020/21 self-assessment liability if your tax and Class 4 National Insurance bill for 2019/20 was at least £1,000, unless at least 80% of your tax is collected at source, for example, under PAYE. Each payment on account for 2020/21 is 50% of the tax and Class 4 National Insurance liability for 2019/20. You must make the payments by 31 January 2021 and 31 July 2021.

However, because of the impact of the COVID-19 pandemic, your liability for 2020/21 may be considerably lower than that for 2019/20. The payments on account for 2020/21 are based on pre-pandemic profits of 2019/20; where your income has fallen significantly, you may wish to reduce your 2020/21 payments on account to more realistic levels. However, when working out your estimated liability for 2020/21, remember to include any COVID-19 support payments as these are taxable. You can opt to reduce your payments on account by completing the relevant section of your self-assessment tax return or via your personal tax account.

Payment difficulties

If you are struggling to pay the tax that you owe by 31 January 2021, you may be able to set up an arrangement to spread the cost and pay your tax in instalments. You can do this online if you owe £30,000 or less and have no other payment plans or debts with HMRC; otherwise, you will need to contact HMRC to agree a payment plan.

Interest and penalties

If you pay any tax owing for 2019/20 after 31 January or make your 2020/21 payments on account late or reduce your payments on account by too much, you will be charged interest. Interest is also charged where payments are made in instalments. In the absence of an instalment plan, you will also be charged penalties at the rate of 5% of the unpaid tax where it remains unpaid after 30 days, six months and 12 months.