Tax Tips – Business Question:
I have just realised that I had completely forgotten about the Self Assessment Filing Deadline and my tax return should have been submitted yesterday and tax paid. What is the situation in relation to fines and what tax do I have to pay now?
You are correct in that the UK Self Assessment Filing Deadline is 31 January following the end of the income tax year. The tax returns for the tax year ended 5 April 2020 were due to be filed on 31 January 2021 with any tax due for that year also falling due yesterday, 31 January 2021. Following a surprise announcement on Monday 24 January 2021 however, the HMRC Chief Executive Jim Harra extended the filing deadline for your 2019/2020 tax return out until 28 February 2021. However, he did not extend the payment deadline and therefore if you owe tax you will start incurring interest from 1 February 2021
The tax that is normally payable on 31 January of each year is any balance of tax due for the tax return in question, together with the first payment on account for the tax year which has not yet ended (2020/2021 at the minute). In addition, 31 January following the end of the tax year is the day on which Capital Gains Tax due on capital gains realised during the previous tax year needs to be paid. However, there is an important exception from this which is capital gains incurred by UK residents on the disposal of residential property (with the exception of your own home or inter-spousal transfers). Contracts exchanged for the sale of UK residential property on or after 6 April 2020 must be paid within 30 days of the transaction.
Following the outbreak of the Covid-19 pandemic, HMRC advised taxpayers that they could defer making their 31 July second payment on account for the 2019/20 tax year. If you availed of this facility, you must remember that you have to make this payment now along with any balancing payment due for the 2019/20 tax year as well as the first payment on account for the 2020/21 tax year. Interest will be charged from 1 February on any outstanding tax liabilities. However, HMRC recognises that many taxpayers in these unprecedented times may not be able to afford to pay all of their tax bills in one lump sum and therefore you can apply online to spread the tax liability over a period of up to 12 months. However, you must file the 2019/20 tax return before they will entertain allowing you a time to pay arrangement. And therefore it is advisable that you file your tax return as soon as practicably possible.
Thankfully, there will be no late filing penalties charged for the filing of your late online tax return if it is filed online before 28 February 2021.
The Revenue has also confirmed that an online payment plan can be set up to spread the payment of your self-assessment bills of up to £30,000 over 12 months. However, if you bill exceeds £30,000 or if you need more than 12 months to pay the bill, a bespoke time to pay arrangement must be negotiated with HMRC directly. The initial request for this must be made personally even if you have a tax agent.
For more information and/or assistance, please do not hesitate to contact me at the email address below or phone our Tax Team