Karoline Gore looks at HMRC's tax submission policies and what they mean for January 2021 self assessment filings. 

With the self-assessment deadline looming, around 5.4 million self-assessment customers will be finalising their tax submissions by the end of this month. With the deadline less than a month away, professional bodies and customers have been calling on HMRC to delay the 31 January tax filing deadline. With multiple lockdowns and drastically changing finances for self-employed customers in 2020, many people are struggling to complete their self-assessment on time - or to afford the payments on account. However, HMRC has recently issued a response refuting requests to extend the deadline, but promising to keep the matter under consideration. With the pressure on to get those self-assessments in by midnight on 31 January, many are now beginning to wonder about their options if they cannot meet the deadline, and the consequences should they miss it.

Penalties For Late Filing Of Self Assessment

If you miss the deadline for filing or paying your tax bill, you are liable to receive a penalty of £100 if your self-assessment is less than three months late. Consumers will also have 30 days from filing to pay their tax due, or risk being fined 5% of their tax bill. If you do miss the 90-day late filing window, each additional day your return is late will cost you £10.

It is also important to note that HMRC charges interest on any tax owing. The current late payment interest charge is 2.6% as of April 2020. Penalties for late filing and late payment of your self-assessment tax are also independent, which means failure to submit your self-assessment on time can result in consumers paying both fines at the same time. This presents two important issues that the self-employed must overcome during this tax season: timely filing of their tax return and the payment on accounts.

Options For Late Filing

If you do miss the self-assessment deadline, your options weigh heavily on contacting HMRC as soon as possible. According to the ICAEW, an acceptable practice when the filing deadline cannot be met is to file your self-assessment using provisional figures or estimates of any missing information. However, acceptance of this method depends on the extent of the effort put forth by the client on obtaining the missing information. HMRC has said that it will not accept this if there is proof of little effort being made, or your accountant did not request the details on time.

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If your self-assessment filing has been affected by COVID-19, there may also be grounds for appeal against any penalties. To do this, clients must submit their tax returns and await the penalty notice before appealing. The appeal process is done online for taxpayers and by using an SA370 for agents. Additionally, HMRC has confirmed that circumstances relating to COVID-19 would be considered reasonable grounds for appeal consideration, with fines waived for those who file late due to the pandemic.

Options For Non-Payment Of Balances On 31 January

If taxpayers find themselves unable to pay their balances on 31 January 2021, one of the first options they have is to contact HMRC’s payment hotline to work out a payment plan. According to ICAEW and guidance published by HMRC, the deadline for negotiating extended payment deadlines is 2 March, 2021. Insights from the Tax Faculty recommends taxpayers take proactive steps to increase their chances of getting HMRC to agree to payment schedules, including keeping your paperwork for tariff payments updated and having reliable financial forecasts to aid in their payment plan suggestions.

Alternatively, those with a tax bill of £30,000 or less can apply for time to pay their taxes over 12 months. In October 2020, the UK government raised the tax liability threshold to £30,000 as part of their pandemic response and in a bid to give self-assessment customers access to enhanced payment plans. According to the Financial Secretary to the Treasury, Jesse Norman, “We are supporting jobs by giving more breathing space to up to 11 million Self Assessment taxpayers when managing their tax affairs. Enhancing Time to Pay should ease the financial burdens and protect the livelihoods of these taxpayers as they navigate the months ahead.”

With the clock ticking on the self-assessment deadline, it is now down to taxpayers to become familiar with the options available if they cannot meet the 31 January cut-off. Regardless of their choice, immediate action is recommended.