HMRC Self Assessment 2021 - An Update

If you’re obliged to pay Self Assessment tax you’ll undoubtedly be aware of HMRC’s announcement on 25th January 2021 that Self Assessment customers will not receive a late filing penalty for their late tax return if they file their tax return online by 28th February 2021.

Many people have not fully understood this - seeing the delayed submission date only as a welcome reprieve after a challenging year. For many, working out the year’s income and expenses allowed is a dreaded task and put off until the last minute. But there are important points to consider with the deferral.

The ‘Small Print’

It’s crucial to note that this easement is for late filing penalties only - it doesn’t affect any other tax obligations.

Returns received in February will be treated in the same way as late returns in a normal year where there is a reasonable excuse for a delay in submission. The late submission penalty may not be charged this year, however the tax return in question will be considered as ‘late’ for all other intents and purposes.

The date for payment of tax remains as 31st January, with interest accumulating from 1st February onwards. If any tax remains outstanding by 3rd March 2021, customers will be charged a late payment penalty comprising 5% of the amount still due.

Those customers affected by HMRC Exclusions, who had until 31st January to file on paper, will avoid a late filing penalty provided they file their return by 28th February. The removal of the fine for late filing will be applied to the paper-only returns SA700 and SA970, and online returns of SA800 and SA900, provided these are filed by the end of February.

Paper submissions of SA800 and SA900 will not be eligible for the easement, as the paper filing deadlines for these forms was 31st October 2020.

Time to Pay and Payment On Account Deferrals

HMRC’s Self Assessment deferral includes all taxpayers. Customers who were unable to pay in full by 31st January can use HMRC’s Self Serve ‘Time to Pay’ to set up a payment plan in installments affordable to them. There will still be interest charged, however the late payment fee will be waived as long as the terms of the payment plan are adhered to.

This has been useful for those with payments that have been deferred by HMRC - as one of the Government’s coronavirus support measures, Self Assessment taxpayers were given the option of deferring the payment of their July 2020 Payment on Account until 31st January 2021.

Those who deferred this payment had up to three payments due at the end of January - any deferred July 2020 payment on account, any 2019 to 2020 balancing charge, and the first 2020-to-2021 payment on account

Customers required to make payments on account, who know their bill is going to be lower than the previous tax year (perhaps due to loss of earnings as a result of the pandemic) can take steps to reduce their payments on account.

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About the author

Sumit Agarwal
Sumit Agarwal (ACMA ACA India), the Managing partner of dns accountants is a highly respected accountant with expertise in helping owner-managed businesses.