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Self Assessment update: coronavirus ‘reasonable excuses’, reducing payment on account, and more time to pay tax

3-minute read

Sam Bromley

14 January 2021

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HMRC has announced that if coronavirus has affected someone in either their personal or business life, it’ll accept that as a ‘reasonable excuse’ for missing the 31 January filing deadline.

But what counts as a Covid-19 related ‘reasonable excuse’? HMRC is being vague, saying it’ll treat each appeal on a case-by-case basis – and the tax body is still facing calls to extend the deadline altogether.

Update: HMRC has announced that it's cancelling late filing fines in February, meaning that if you can't file by 31 January, you won't get a penalty as long as if you submit before 28 February. You do still need to pay your tax bill. Read more.

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HMRC is encouraging people to file on time

When you miss the Self Assessment filing deadline, HMRC can issue an automatic £100 penalty. After that, you could be charged £10 for each further day it’s late, up to a maximum of £900.

If you still haven’t filed your return after three months, HMRC will apply additional penalties.

But there are ‘reasonable excuses’ for missing the deadline that HMRC will consider when deciding whether to waive penalties. These include unexpected hospital stays, serious illnesses, and bereavement.

Now, HMRC has added coronavirus-related difficulties to that list. HMRC said: “We want to encourage as many people as possible to file on time even if they can’t pay their tax straight away, but where a customer is unable to do so because of the impact of Covid-19 we will accept they have a reasonable excuse and cancel penalties, provided they manage to file as soon as possible after that.”

As mentioned, this will be on a case-by-case basis, and it doesn’t mean that penalties will be waived automatically.

So if you miss the deadline, you’ll still get a penalty that you’ll need to appeal – although HMRC has extended the penalty appeals period to three months and will make the process easier, reports FT Adviser.

While various groups, including the Association of Accounting Technicians (AAT), have been pushing for an extension to the filing deadline, HMRC has so far rejected these calls. At the start of January, almost half of Self Assessment taxpayers were yet to file.

Ultimately, if you’re able to fill in your Self Assessment tax return by 31 January, it’s important you do it sooner rather than later. We've got more on how to file a Self Assessment tax return here (as well as a separate guide for landlords).

Read more about HMRC penalty appeals and reasonable excuses.

File as soon as you can if you think you’ll struggle to pay

HMRC has confirmed that it’s not waiving late payment penalties.

Most people will need to complete their return to know how much tax to pay, but late payment penalties don’t get added until 30 days after missing the deadline. This means that if you miss the filing deadline because of coronavirus, you might be able to avoid a late payment fine, as long as you file and pay as soon as you can after the deadline.

That being said, if you think you’ll struggle to pay on time, it’s worth doing your tax return as soon as possible. That’s because if you owe up to £30,000 you can use HMRC’s Time to Pay service to set up a payment plan online. With Time to Pay, you can pay your tax bill by Direct Debit over 12 months.

To use Time to Pay, you need to file by 31 January and set up a plan no later than 60 days after 31 January. Keep in mind that interest will be added to the balance from February.

Read more about setting up a payment plan with HMRC Time to Pay.

What about reducing payment on account?

If coronavirus has impacted your business and your tax bill for 2020-21 is likely to be less than 2019-20, you could consider reducing your payment on account. You should be able to do this on the return itself.

Payments on account are advance payments towards your next tax bill, estimated on the bill for the previous tax year.

Your first payment on account for 2020-21 makes up part of your payment due on 31 January. HMRC said: “Our guidance is clear that customers can ask to reduce their payments on account online or by post if they know their tax bill is going to be lower than last year.”

Some coronavirus support grants, including the Self-employment Income Support Scheme, are taxable. Keep this in mind when estimating your tax liability for 2020-21.

Please use this article as a guide – if you need more help and support with your tax, it's always best to speak to a professional, like your accountant.

How are you getting on with your Self Assessment tax return this year? Let us know in the comments below.

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