While self-assessment tax returns for the 2020/21 tax year remain due by 31st January 2022, HMRC has announced a series of measures to try and relieve some of the strain on businesses, which continue to be impacted by the pandemic.
Although submission and payment due dates haven't changed, there is greater leniency for late payments, which may support thousands of self-employed businesses.
However, the caveat is that while late payment penalties may not be payable, interest certainly is.
If you have any queries about filing your self-assessment returns, please contact the SAS Accounting team for independent guidance!
Changes to Late Filing Fees for January 2022 Tax Returns
The crux of the announcements, made on 6th January, is that the tax office isn't going to levy penalties for businesses that cannot pay their tax bills on time - although they'll continue to charge interest as normal.
Changes, for this year only, mean that:
- Tax returns should be filed by 31st January 2022, but a late filing penalty will not be issued against returns made by 28th February.
- Payments remain due on the same 31st January deadline, but HMRC will not charge late payment penalties, provided the tax bill is paid in full, or a Time to Pay agreement reached before 1st April.
As we mentioned above, interest isn't affected, and the due dates haven't changed, so if you fail to submit your tax return and pay the liability, interest will accrue from 1st February onwards, regardless of when you file or pay your income tax charges.
This news is positive for many businesses and recognises the need to offer additional time for self-employed taxpayers that have had a challenging few months.
SAS is pleased to share this update but would urge caution since any cash flow issues may be further impacted by tax interest.
Creating a strategy with professional support to decide how you will manage finances disrupted by recent events is the best possible course of action.
Applying for a Time to Pay Agreement
Another important component is that if self-employed businesses reach an agreement through the Time to Pay service, they will not incur any subsequent penalty, as long as this is confirmed by 1st April.
We'd reiterate that this extension applies only to remittances and not to submission deadlines.
Time to Pay offers:
- The potential to pay an HMRC liability in instalments if the debt is under £30,000.
- Online applications - although some businesses are directed to contact the tax office via phone.
- Structured, regular instalments for taxpayers that have no pre-existing tax debts.
It is worth noting that you cannot apply to Time to Pay in advance of filing your tax return.
The priority is to successfully submit your income records for the previous year and then consider the options to spread the arising payments over the coming months.
Accountancy Advice for Self-Assessment Tax Returns
This unexpected announcement is undoubtedly welcome news for many self-employed individuals and sole trader businesses!
At SAS, we're always pleased to share information that may remove an element of pressure, which inevitably increases in January each year as return dates loom, and tax bills appear on the horizon.
Our takeaway is that HMRC appreciates to some extent the extreme difficulties of the pandemic and how the Omicron variant has affected trading - but will highlight again that removing late payment charges, albeit for a limited time, does not impact interest.
Self-assessment returns over four weeks late will attract a fine, and late payments, not supported with a Time to Pay agreement, will equally attract a penalty.
We would urge all clients to return their tax information as promptly as possible to comply with the 31st January submission deadline.
From there, if you require guidance about applying for Time to Pay or assessing whether your business is likely to be eligible, we remain on hand to steer you through the process and help you make informed decisions about the best ways to deal with any tax debts owing.