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What happens if I miss the Tax Return deadline?
Tax Tips – Business Question:
I am under considerable pressure to be in a position to file my personal tax return and pay the amount of tax owing by 31 January 2021. What happens if I miss the deadline?
Answer:
Anyone who needs to file an annual self-assessment tax return online may avoid paying a penalty fee if they miss this month’s deadline due to coronavirus related reasons, although penalties for paying tax late will still apply.
The deadline for completing a 2019/20 self-assessment tax return online is 31 January and those who file one later than that would usually have to pay a fine. But this year HMRC says it will accept pandemic-related personal or business disruption as a “reasonable excuse” for being unable to file on time, and it’ll cancel penalties as long as you file as soon as possible after that.
HMRC, has, however, been vague on what exactly counts as a valid coronavirus-related reason. They have been unwilling to give any specifics and they say that they’ll look at each situation on a case-by-case basis – so it’s unclear, for example, if you can file late because you ran out of time due to homeschooling.
My advice, if you can, is still to file on time by the 31 January deadline. If you’re struggling due to coronavirus but are unsure if you have a valid excuse, you should contact HMRC directly to check. In reality, many who file late due to coronavirus may still have to pay a fine if they are late paying their tax, as the penalties for that remain unchanged – though they don’t kick in until 30 days after the 31 January deadline.
When you miss the self-assessment filing deadline, HMRC can issue an automatic £100 penalty. After that, you could be charged £10 for each further day it’s late, up to a maximum of £900. If you still haven’t filed your return after three months, HMRC will apply additional penalties.
But there are ‘reasonable excuses’ for missing the deadline that HMRC will consider when deciding whether to waive penalties. These include unexpected hospital stays, serious illnesses, and bereavement. Now, HMRC has added coronavirus-related difficulties to that list. HMRC said: “We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of Covid-19 we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that.”
As mentioned, this will be on a case-by-case basis, and it doesn’t mean that penalties will be waived automatically.
Of course, many may struggle to pay the correct amount of tax if they haven’t also filed their return – so if you can file a return and pay your tax by 31 January, it’s best to do so. If you don’t pay on time, as above, penalties for late payment don’t kick in immediately after 31 January – you’ll be charged 5% of the unpaid tax after 30 days, plus 5% after six months and again after 12 months. So if you miss the 31 January deadline, sort it as soon as you can and you may still be able to avoid a fine.
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If you were due to make an ‘on account’ (ie, advance) payment by 31 July 2020 – and not everyone has to – the Government gave you an extra six months to pay, but that runs out on 31 January unless you’ve agreed a separate repayment plan with HMRC. This payment is meant to cover roughly half of your 2019/20 bill and is calculated by using half of your actual bill for the 2018/19 tax year.
In addition, you need to pay any remaining tax owed from the 2019/20 tax year (known as a balancing payment) – again, unless you’ve agreed a repayment plan – as well as make your first payment on account for the 2020/21 tax year.
As above, it’s worth bearing in mind that penalties for late payment aren’t charged until 30 days after the 31 January deadline. But if you think you’ll struggle to pay what you owe in time, you can use HMRC’s ‘Time to Pay’ arrangement to set up a repayment plan. Those who owe tax of less than £30,000 in January 2021 can use this to spread that tax bill and repay it by direct debit over up to 12 months. To use this service, you need to have filed your 2019/20 tax return by the 31 January deadline and set up the repayment plan no later than 60 days after the due date of a debt. In addition, you need to have no outstanding tax returns, other tax debts or other payment plans set up.
For more information and/or assistance, please do not hesitate to contact me at the email address below or phone our Tax Team
The advice in this column is specific to the facts surrounding the questions posed. Neither FPM nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.
