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Category: Self-Assessment

Self-assessment late payment penalty

Self-assessment late payment penalty

HMRC announced in January that they would not charge a late filing penalty if your 2019/20 tax return was not filed by midnight on 31 January 2021, as long as the return was filed by 28 February 2021. Any tax due by 31 January 2021 should still have been paid by that date, unless a time-to-pay arrangement had been agreed.

Where tax is paid late, interest is charged from the due date (31 January) until the date of payment. Penalties may also be charged. However, this year, a late payment penalty will not be charged as long as the tax is paid by 1 April 2021, or a time to pay agreement set up by that date.

Interest on late paid tax

Interest is charged from 1 February 2021 on any amounts unpaid at that date. This is the case regardless of whether or not a time-to-pay arrangement is in place.

Late payment penalty waived

The first late payment penalty – set at 5% of the unpaid tax – is normally charged where the tax remains unpaid after 30 days. However, HMRC have announced that the late payment penalty will be waived as long as the tax is paid, or a time-to-pay arrangement is agreed, by 1 April 2021.

You can set up a time-to-pay arrangement online.

Speak to us

Speak to us if you have unpaid tax and you need help in setting up a time-to-pay arrangement.

February 24, 2021

Gift Aid warning

Gift Aid warning

If you are a taxpayer and you make a Gift Aid declaration when making a donation to a charity, the charity can reclaim basic rate tax on your donation.

Tax relief on the donation

A donation made under Gift Aid is treated as being made net of the basic rate of tax, currently 20%. The charity can reclaim 25% of the amount donated. For example, if you donate £100, the charity can reclaim £25 (25% of £100), bringing the total donation up to £125. Your donation of £100 is 80% of the total donation, with the charity reclaiming the remaining 20%, i.e., £25.

If you are a higher rate taxpayer or an additional rate taxpayer, you can claim relief through your self-assessment tax return for the difference between the highest rate at which you pay tax and the basic rate relief received at source – a further 20% of the gross donation for higher rate taxpayers and a further 25% for additional rate taxpayers.

Have you paid enough tax?

The tax that is reclaimed by the charity on the donation is funded by the tax that the taxpayer has paid. As long as you pay more tax than the charity reclaims on your Gift Aided donations, all is well. However, problems can arise if your income falls and you have not paid enough tax to cover that reclaimed on your Gift Aid donations. If this is the case, HMRC will look to you to make up the shortfall.

Review your Gift Aid donations

If your income has fallen for 2020/21, either as a result of the COVID-19 pandemic or otherwise, you may wish to review your regular Gift Aid donations to ensure that you have paid sufficient tax to cover the basic rate relief given at source. If your income has fallen below the level of the personal allowance, set at £12,500 for 2020/21 and rising to £12,570 for 2021/22, you should cancel any existing Gift Aid declarations so that you do not have to repay the tax claimed on those donations back to HMRC.

When making one-off donations, consider your tax position before completing the Gift Aid declaration.

Contact us

If you would like to review the tax effectiveness of your charitable donations, please contact us.

February 17, 2021

File your tax return by 28 February

File your tax return by 28 February

The normal deadline for filing the 2019/20 tax return is 31 January 2021. However, HMRC announced in a press release issued on 25 January 2021 that they would not issue a late filing penalty as long as the 2019/20 tax return is filed online by 28 February 2021. However, any tax due by 31 January 2021 must still be paid on time.

Extended deadline

Jim Harra, Chief Executive of HMRC, confirmed that taxpayers will not receive a penalty for the late filing of their 2019/20 tax return, as long as the return is received online by 28 February 2021. HMRC have previously resisted attempts to extend the deadline due to the pressures imposed by the COVID-19 pandemic. The change of heart came late in the day as HMRC accepted that it had become increasingly clear that people were struggling to meet the 31 January deadline. The extension will provide taxpayers with breathing space to complete their returns.

Normally, a penalty of £100 is issued automatically if the return is filed after midnight on 31 January.

No change to tax payment deadline

Despite the relaxation to the filing deadline, any tax due by 31 January 2021 must still be paid by this date. This will include any remaining tax due for 2019/20, including the July 2020 payment on account where this was delayed, and also the first payment on account for 2020/21. Interest will run from 1 February 2021 on any tax paid late

Taxpayers struggling to pay their tax in full and on time can set up a Time to Pay arrangement and pay what they owe in instalments. You can do this online if the tax that you owe is £30,000 or less. However, you will need to file your return before you can set up an instalment plan.

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Speak to us if you need help filing your 2019/20 tax return or setting up a Time to Pay arrangement.

January 27, 2021

31 January self-assessment deadline approaching

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.

Contact us

Please let us know if you would like us to file your return on your behalf or if you need help working out what tax you need to pay and by when.

December 2, 2020

File your tax return by 30 December 2020

File your tax return by 30 December 2020

Although the deadline by which your 2019/20 self-assessment tax return must be filed online is 31 January 2021, an earlier deadline of 30 December 2020 applies if you want any tax that you owe for 2019/20 to be collected through PAYE. This can be advantageous as you can spread the cost across the tax year, rather than paying it in a single instalment.

Conditions

You can pay your self-assessment bill through PAYE if all of the following apply:

  • the amount that you owe is £3,000 or less;
  • you already pay tax through PAYE (for example, because you are an employee or you receive a company pension); and
  • you either submitted a paper tax return for 2019/20 by 31 October 2020 or filed your return online by 30 December 2020.

You should note that if you meet all of these conditions, HMRC will collect any tax that you owe through the PAYE system. If you file your self-assessment return by 30 December 2020 and owe less than £3,000 and do not want to pay it in this way, you will need let HMRC know. You can do this on your tax return. If you choose this route, you will need to pay the tax you owe for 2019/20 by 31 January 2021 (unless you have agreed a Time to Pay arrangement with HMRC).

You will not be able to pay any tax that you owe via PAYE if:

  • you do not have sufficient PAYE income to cover the tax that you owe;
  • collecting tax in this way would mean that you would pay more than 50% of your PAYE income in tax; or
  • if you would end up paying twice as much tax as you would do otherwise.

Collection through your tax code

Your tax code will be adjusted to facilitate the collection of the tax that you owe through the PAYE system. The adjustment will reflect the amount that you owe and the rate at which you pay tax.

Underpayments for 2019/20 will be collected by adjusting the 2021/22 tax code. Adjusting the tax code will have the effect of collecting the underpaid tax in 12 equal instalments over the 2021/22 tax year. Interest is not charged, meaning this is an interest-free way of paying any tax that you owe in instalments.

Speak to us

If you have a tax underpayment of £3,000 or less and would like it to be collected via an adjustment to your 2021/22 tax code, please let us know so that we can ensure that your 2019/20 tax return is filed by the 30 December 2020 deadline.

November 18, 2020