HMRC may have extended the self-assessment deadline but be warned...
In a last minute turn of events, earlier this week HMRC announced a 4 week extension to the self-assessment deadline. On the face of it, for the millions of self-employed and businesses, many of whom will have seen their income reduced, or even worse completely removed due to the Covid-19 pandemic, this is welcome news indeed and a veritable lifeline.
However, there is a caveat.
Whilst the £100 fine for filing your tax return late will be cancelled until 28th February, if you do not pay the tax and NI that you owe by 31st January, interest will still continue to be accrued for every day missed until paid in full. You could say the tax office is giving back from one source, but taking from the other.
If you have not completed your tax return, unless you understand the intricacies of tax and NI calculations, you may understandably be unable to ascertain the exact amount you actually owe, which is almost certainly likely to provoke a challenge to HMRC as to why they couldn’t extend the payment deadline simultaneously.
Whether or not you’ve filed your tax return before 31st January, you are of course able to make a payment on account using an approximate figure. If at a later date, it transpires you’ve made an overpayment, you are entitled to claim back the difference. It is advisable to try and make some form of payment as a daily interest rate of 2.6% (from 1st February) will soon start to add up, even over a short period of time. Nonetheless if circumstances really do dictate an inability to pay, it’s imperative that you contact HMRC to discuss a payment plan providing you owe less than £30,000 and more than £32; failure to do so will incur a 5% surcharge if the debt is 60 or more days old. Please be aware you will still incur interest fees whilst utilising a payment plan, but it could be a far more effective way for you to pay your tax in the current economic climate.
Of course it is not just the self employed who are required to complete a tax return. Other criteria include:
- If your income is higher than £50,000 and you or your partner claimed child benefit
- You earned in excess of £2500 from renting out your property, or through tips or commission (and other untaxable income)
- You had a taxable income of over £100,000
- You earned over £10,000 from savings, investments, dividends or shares
- You earned income from abroad, or lived outside of the UK with a UK income
- You owe capital gains tax or received income from a trust
- Your state pension superseded your personal allowance and was your sole income (unless you started claiming your pension on or after 6th April 2016)
- HMRC have advised you didn’t pay enough tax from the previous year
- You filed a self assessment tax return last year and HMRC have not told you it is no longer needed
There is a very well known saying that there are two certain things in life – one is the fact that we will all, some day, leave this mortal Earth behind, and the other is that during our lifetimes we will all be forced to pay tax! If you need any assistance with your tax affairs, then please do get in touch for independent, personal advice that is tailored to you and your circumstances.