Are you self-employed? Did you miss the Self-Assessment tax return deadline? Well, you’re not alone. It seems over two million people failed to file a return on time, according to HMRC. But what happens if you missed the deadline? And how do you pay your tax bill?
First, take a deep breath and don’t panic. All is not lost, and here’s why.
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When was the tax return deadline?
The deadline for filing your 2020/21 tax return online was 31 January 2022. For those who file paper returns, though, the deadline was 31 October 2021.
For clarity, the information below only relates to online Self-Assessment returns. If you file paper tax returns and you haven’t filed yet, contact HMRC to discuss the situation.
What happens if you missed the tax return deadline?
Okay, so you missed the tax return deadline and now you are (probably) panicking. But fear not – it’s not all bad news.
Normally, customers pay a £100 penalty for missing the tax return deadline. However, this year, customers have until 28 February 2022 to file a tax return without paying the penalty. This means you won’t pay the late filing penalty unless you submit your return on 1 March 2022 or later.
Why is this the case? Well, HMRC recognises the challenges posed by the Covid-19 pandemic. As a result, they’re giving businesses a grace period to file their returns. That said, you should still submit your return as soon as possible, and here’s why.
Will you pay interest on late payments?
Although you won’t pay a late filing penalty if you complete your return by 28 February 2022, you need to consider what’s known as the late payment interest and the late payment penalty.
From 1 February 2022, late payment interest will apply to any outstanding balances. The interest rate is 2.75%. If there’s still tax outstanding by 1 April 2022, and you haven’t set up a payment plan, you’ll pay a 5% late payment penalty.
What does this all mean? In short, it’s a good idea to pay as soon as possible to minimise the interest payable. If you can’t pay your whole tax bill, again, don’t panic. You can set up a payment plan. Just make sure you at least file your return as soon as possible and then contact HMRC if you can’t pay in full.
So, for clarity, here’s a summary of the timeline:
- 31 January 2022: normal tax filing deadline.
- 1 February: interest begins to accrue on outstanding balances.
- 28 February: the last day to file a return without paying the £100 late filing penalty.
- 1 April: the last day to either pay outstanding tax or set up a payment plan without paying the late payment penalty.
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How do you file your tax return?
To file your tax return for 2020/21, simply log on to the HMRC online service. Follow the step-by-step instructions to submit the return and make a payment.
Do you want to set up a payment plan (Time to Pay) arrangement? You can do this from your online account once you’ve submitted your return.
Takeaway
The key takeaway? It’s not advisable to miss the tax return deadline. However, if you were unable to file, for whatever reason, then it’s crucial you take action as soon as possible. And if you’re struggling to pay your tax bill, contact HMRC to discuss what help is available. You may be able to pay in instalments or reach another arrangement.
The content in this article is provided for information purposes only. It is not intended to be, nor does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
