The Low Incomes Tax Reform Group (LITRG) is urging people to complete their 2019/20 Self Assessment tax return online by the usual deadline of 31 January1 or risk a fine from HMRC. HMRC charge an automatic penalty of £100 for tax returns that miss the deadline, and the penalties increase the later the return.2
LITRG’s call for action comes after HMRC resisted requests from various professional bodies to either extend the 31 January 2021 deadline or not to charge the £100 penalty automatically this year despite the pressures faced by some individuals and accountancy firms because of the COVID-19 pandemic. This means that 2019/20 tax returns must be completed online before 31 January to avoid the £100 automatic penalty.
LITRG hopes the public heed its warning as half of people are yet to file tax return; HMRC had received 6.6 million tax returns as of 4 January 2021, out of a total 12.1 million returns due to be filed before the 31 January deadline.3
Victoria Todd, Head of LITRG Team, said:
“Despite the continuing disruption to our daily lives caused by the coronavirus pandemic, it is vital that people understand the 31 January Self Assessment deadline remains and act without delay. There is still time to avoid a penalty if you are one of the millions of people yet to complete and submit a tax return online for 2019/20. If you have not yet registered for online filing, this process can take a few weeks so you will need to do it now.”
HMRC say they will accept pandemic-related disruption as grounds to appeal the penalty if that is the reason for the late filing. Taxpayers must appeal within three months of the penalty charge.4
The deadline for payment of any tax due for 2019/20 also remains 31 January 2021. This includes any deferred payments on account which were originally due for payment on 31 July 2020. Taxpayers may also have to pay their first payment on account for 2020/21 on 31 January 2021. Taxpayers unable to settle these amounts in one payment can make a time-to-pay arrangement with HMRC to spread them across a longer period,5 but they must first submit their tax return.
Victoria Todd said:
“We know that people may be facing financial difficulties because of the pandemic. If you think you might find it difficult to pay your tax bill, you must still try and submit your tax return so that you know how much tax you are due to pay. You may qualify for HMRC’s expanded online service, which allows you to pay your tax bill in instalments over a maximum of 12 months. If you do not qualify for this or need longer to pay, you should get in touch with HMRC as soon as possible.
“You may have started your tax return but are stuck with the tax treatment of a particular expense, unsure if parts are correct or even if you still need to file a tax return. There is guidance available from organisations such as LITRG and HMRC.6 If you are unable to finalise your return because you cannot obtain certain information, such as a figure for bank interest, consider filing a return with estimated or provisional figures to avoid a late-filing penalty being charged.7
“Double-check that you have correctly submitted your return online once you have fully completed it. You may complete your tax return and print off a draft return and tax calculation but not realise that you also need to submit the return as the last step of the online process. You should get a submission receipt from HMRC once the process is completed if you have used HMRC’s online filing system correctly.”
Notes for editors
1. Self Assessment is a system HMRC use to collect income tax and capital gains tax. Tax is usually deducted automatically from wages and pensions (but not from the UK state pension). Savings income is usually paid gross, but tax can still be payable. People and businesses that do not have tax deducted at source usually have to complete a tax return, even if there is no tax to pay. Also, self-employed subcontractors who have had tax deducted under the Construction Industry Scheme need to file a tax return even if there is no additional tax to pay. HMRC provide a tool if you are unsure whether you need to file a return. In order to file online for the first time through HMRC’s online service, a taxpayer must have received their Unique Taxpayer Reference (UTR), enrolled for the online service and activated their account using the code they receive.
The 31 January 2021 deadline for online filing applies to those who have been issued a notice to file a 2019/20 tax return where that notice was issued prior to 1 November 2020. Where the notice to file a 2019/20 tax return was issued on or after 1 November 2020, the deadline for filing the return is deferred until three months from the date the return was issued. The deadline for notifying HMRC of any untaxed income or certain capital gains is 5 October following the end of the tax year. If taxpayers have not notified HMRC of their obligation to file a return and they are not otherwise registered for Self Assessment, then they cannot yet have been issued with a return. Although this defers the filing deadline, separate penalties based on tax unpaid by 31 January may be applicable as a result of the late notification.
2. The penalties for late tax returns are:
an initial £100 fixed penalty, which applies even if there is no tax to pay, or if the tax due is paid on time
after three months, additional daily penalties of £10 per day may be charged, up to a maximum of £900
after six months, a further penalty of five per cent of the tax due or £300, whichever is greater
after 12 months, another five per cent or £300 charge, whichever is greater
There are also additional penalties for paying late of five per cent of the tax unpaid at 30 days, six months and 12 months. Interest will be charged on all late payments. Earlier deadlines usually apply for paper returns (generally 31 October after the end of the tax year).
3. See HMRC press statement: Self Assessment deadline: less than one month to go, 5 Jan 2021
5. Taxpayers may also consider reducing the first payment on account for 2020/21. For further information, see our recent article https://www.litrg.org.uk/latest-news/news/201211-worried-about-your-january-2021-tax-bill-hmrc-service-spread-payment-may . Please bear in mind that if you reduce your payments on account below what they should in fact have been you will have to pay interest on the shortfall from the date each payment on account was due and in some cases HMRC may charge a penalty if the reduction is excessive.
6. The LITRG website has comprehensive guidance on most areas of tax and HMRC have many sources of information including webinars, YouTube videos and webchat facilities, as well as its Self Assessment helpline (0300 200 3310).
7. Provisional figures are those which the taxpayer intends to update once they have final information. The taxpayer is required to declare they have used provisional figures on the tax return and the enquiry window is extended. They should also explain when the final figure can be provided. Estimated figures should be used when they are intended to be final, for example where records have been lost. In either case, the taxpayer should explain on the return why an estimated or provisional figure has been used and seek advice if they are unsure. Taxpayers are expected to take reasonable care in completing their return and to make their best efforts to establish the actual figures before using provisional or estimated figures, otherwise penalties may apply. We provide further information at https://www.litrg.org.uk/tax-guides/tax-basics/enquiries-penalties-appeals-complaints-and-debt/tax-penalties#toc-what-does-reasonable-care-mean-.
8. Low Incomes Tax Reform Group
The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.
The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.