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13 January 2021

Self-Assessment Tax Deadline

Tax Tips – Business Question:

As the self-assessment tax deadline and payment date approach, I am concerned that I may not be able to pay my tax liability in full and was considering not filing my return until later in the year.  Can you advise what my options are?


Where an individual’s tax liability is greater than £1,000, income tax is generally paid in  3 stages.  Installment payments are due on 31 January and 31 July with a balance of tax due on the following 31 January.  The installment payments represent 50% of the previous year’s tax liability but can be reduced if it is anticipated that the final tax liability would be lower than the previous year.  Due to the COVID-19 pandemic, HMRC agreed that interest and penalties would not be charged if 2019/20,  2nd installment payment,  was not met or paid in full by 31 July 2020, providing the payment was made in full by 31 January 2021.

For some taxpayers, their tax liability for the 2019/20 tax year would relate to profits that were earned prior to the COVID-19 pandemic,  for example, a business with a  year-end of 30 April 2019 would pay tax on these profits in the tax year 2019/20.   Reserves that may have been set aside to pay the 2019/20 liability, may have been utilised to keep their business afloat.  In addition to this, some tax-payers may also have delayed making the 2nd payment on account due on the 31 July 2020, which will also contribute to a higher balance of tax due on the 31 January 2021.

If a self-assessment return is not filed by 31 January 2021, this would give rise to an automatic penalty of £100 with additional penalties being incurred if the return remained outstanding, unless there was a reasonable excuse for late filing.  However, due to the current COVID-19 pandemic, HMRC has announced that whilst they won’t waive late filing penalties nor extend the 31 January 2021 filing deadline, HMRC would take into account and Covid-19 disruptions (tax-payer or agent related)  leading to a missed filing date when considering reasonable excuses.  In addition to this,  HMRC has also announced that they would extend the time period for appealing a penalty from 1 month to 3 months.

‘Due to the challenges businesses have faced as a result of the  COVID-19 pandemic, many tax-payers and business owners have incurred significant cash-flow problems since March 2020.   As the filing and payment date for the Self-Assessment income tax return fast approaches,  31 January 2021, many taxpayers may find that they cannot meet their income tax payment deadline,’ explains Siobhan McCreesh.

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In relation to the payment deadline for the 2019/20 tax year, it is important that your tax liability is calculated and you are aware of the balance of tax that is due.  Until this is known, it will be difficult to plan for its payment and you could incur unnecessary penalties.  Interest charges would accrue on the outstanding tax liability.

Once the tax liability has been established, a time to pay arrangement (payment plan)  with HMRC should be considered. This would allow you to spread the cost over an agreed period of time providing,  the amount outstanding is less than £30,000, there are no other payment plans or debts with HMRC, tax returns are up to date and the payment plan has been set up less than 60 days after the payment deadline.  HMRC may require an initial payment of tax to be made as part of the time to pay arrangement.  The payment plan could be set up via your tax agent/accountant, contacting HMRC directly or online.  In the event that the amount of tax owed is greater than £30,000, it is extremely important that you speak to your accountant urgently to consider other options.

We would strongly advise that you complete your 2019/20 income tax return and discuss your sources of income for the 2020/21 tax year to estimate what your potential 2020/21 liability could be.  This would be an invaluable exercise as it could potentially reduce any 2020/21 payments on account due on 31 January 2021 and 31 July 2021.  It could also give an indication of any potential trade losses that could be carried back to the 2019/20 tax year.   If this is the case, it would also be crucial that your 2020/21 income tax return is prepared and filed early in the next tax year.

Forward planning, understanding your tax liability, and early engagement with HMRC are key to managing your filing obligations and payment deadline during these uncertain times.

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.

Contact Siobhan

Siobhan McCreesh / Associate Tax Director

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