‘Pay your outstanding balance ASAP!’ Millions urged to act after missing deadline

Martin Lewis discusses late filing fee for tax self-assessment

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They now have until February 28, 2022 to submit their late tax return. Failure to do this could lead to a penalty.

Interest will be applied to the outstanding balances of anyone who failed to file their self-assessment tax return by February 1, 2022.

Zena Hanks, a Partner in the Private Wealth team at Saffery Champness, said:

“HMRC did the decent thing in January this year by deciding to waive late filing and late payment penalties for self-assessment taxpayers until February 28, 2022 recognising that continued pandemic disruption has affected many individuals’ ability to get their returns completed on time.

“This extension was welcome, but it is important for the estimated 2.3 million taxpayers who haven’t filed their returns to remember that this is no free hit afforded by HMRC.

“The deadline to file remained January 31, 2022 but the date that was extended was simply the cut-off point after which penalties for late filing or late payment of last year’s tax owed can be levied. What this means, in practice, is that anyone who did not make a tax payment by this date will now be accruing interest.

“HMRC increased its interest rate for late payments at the start of this year. This is likely to be a smaller financial hit than facing an outright fine, but anyone who is yet to file their self-assessment return and pay any outstanding tax balances is advised to do so as soon as possible.”

Indeed, interest on late tax returns will still be payable despite HMRC announcing that it will be waiving late filing and late payment penalties for self-assessment taxpayers.

Interest will be charged on late payments at 2.75 percent.

This is because even though tax returns filed by February 28, 2022 will not be late in terms of owing late payment penalties, the tax return will still be classed as late in the sense that the deadline for HMRC to raise an enquiry into the tax return is automatically extended.

A five percent late payment penalty will be charged if a person’s tax balance remains outstanding and a payment plan has not been set up by midnight on April 1, 2022. Further late payment penalties will be charged at the usual six and 12-month points.

HMCR’s Time to Pay service enables people to spread their tax payments over time.

This is because even though tax returns filed by February 28, 2022 will not be late in terms of owing late payment penalties, the tax return will still be classed as late in the sense that the deadline for HMRC to raise an enquiry into the tax return is automatically extended.

This means that they can pay their tax bill in instalments over 12 months through a payment plan.

Self-assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.  

“The window within which HMRC can open an enquiry extends right up until April 2023 for tax returns filed in February 2022. It is therefore extra important that taxpayers take the time to make sure their returns are correct and that, for example, records of any transactions are accurate and well-maintained,” Ms Hanks added.

HMRC had initially predicted that more than 12.2 million people would file their 2020 to 2021 self-assessment tax returns by the January 31, 2022 deadline.

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However, this figure was instead 10.2 million.

Notably, 95.6 percent of the aforementioned tax returns were submitted electronically with only a small minority using the mail service.

Taxpayers will also need to declare if they received any grants or payments from COVID-19 support schemes up to April 5, 2021 on their self-assessment tax returns as these are taxable.

A self-assessment (or SA100 form) is a system that HMRC uses to find out how much income tax and National Insurance a person needs to pay on any income that isn’t taxed at source.

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