HMRC – self-assessment late filing penalty changes

This is a welcome relief for many as the self-assessment tax returns this year for some are more complex than normal due to the impacts of covid and the various grants and support payments that may have been received and need to be accounted for in the tax return.

HMRC have also confirmed that ‘Time to Pay’ options are still available. Once you have submitted your 2020-21 return you will be able to set up a payment plan to spread the cost of bills up to £30,000 into monthly instalments of up to 12 months.

HMRC have stated:

The payment deadline for Self-Assessment is 31 January and interest will be charged from 1 February on any amounts outstanding. Normally a 5% late payment penalty is charged on any unpaid tax that is still outstanding on 3 March. This year, like last year, HMRC is giving customers more time to pay or set up a payment plan. Self-Assessment customers will not be charged the 5% late payment penalty if they pay their tax or set up a payment plan by midnight on 1 April. They can pay their tax bill or set up a monthly payment plan online at GOV.UK. 

There is no change to the filing or payment deadline and other obligations are not affected. This means that: 

• interest will be charged on late payment. The late payment interest rate from 4 January 2022 is 2.75%
• a return received online in February will be treated as a return received late where there is a valid reasonable excuse for the lateness. This means that:
  • there will be an extended enquiry window
  • for returns filed after 28 February, the other late filing penalties (daily penalties from 3 months, 6 and 12-month penalties) will operate as usual
  • a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2022. Further late payment penalties will be charged at the usual 6 and 12-month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up.
• we will not charge late filing penalties for SA700s and SA970s received in February – these returns can only be filed on paper
• for SA800s and SA900s we will not charge a late filing penalty if customers file online by the end of February – the deadline for filing SA800s and SA900s on paper was 31 October. Customers who file late on paper will be charged a late filing penalty in the normal way, they can appeal against this penalty if they have a reasonable excuse for filing their paper return late
• self-employed customers who need to claim certain contributory benefits soon after 31 January 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time – this is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 balancing payment that is due to be paid by 31 January 2022. Benefit entitlements may be affected if they:
  • couldn’t pay their balancing payment by 31 January 2022, and
  • have entered into a Time to Pay arrangement to pay off the balancing payment and other self-assessment tax liabilities through instalments.

Read the full HMRC guidance here.

Please do note that whilst the 31 January deadline for submission and payment effectively remains unchanged, the waivers outlined are provided to give extra time to those who need it, those that can meet the existing deadline.