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6 Jan 2022

HMRC temporarily waives late filing and payment charges on 2020-21 tax returns

The move aims to help taxpayers and agents that have been affected by Covid-19

HMRC has announced it will once again waive late penalties on late tax returns until 28 February 2022 and late tax payments until 1 April 2022 - but you'll still be charged interest if you don't pay your tax bill by 31 January.

This may come as a relief to the millions of people who are yet to file their tax return - HMRC says it has only received 6.5m of the 12.2m returns it is expecting to receive this year.

The tax authority says many of these taxpayers, or their agents, will have been affected by Covid-19, which could make it difficult to hit the usual filing deadline.

However, HMRC is still urging everyone to hit the usual 31 January deadline if they can, as you can still be charged 2.75% interest on tax that hasn't been paid by this date, and those who claim contributory benefits based on National Insurance Contributions (NICs) may be affected if their tax payments are made after 31 January.

The late payment penalty (equal to 5% of the outstanding tax) is being pushed back to 1 April - by this date, you must have either paid your tax bill in full, or set up a Time to Pay arrangement.

Here, Which? explains who needs to file a tax return, and what happens if you're still late with your tax return.

5.7 million people yet to file their 2020-21 tax return

There are just over three weeks to go until the official 31 January filing deadline, yet just 53% of self-assessment taxpayers - around 6.5m - have completed and submitted their tax returns.

HMRC is urging taxpayers to file their returns as soon as possible. Filing well before the deadline means you'll have time to sort out any unexpected problems or queries, and it will also give the opportunity to set up a Time to Pay arrangement if you're going to struggle to pay this year's tax bill.

HMRC usually contacts people to let them know when they need to file a tax return - however, the onus is on you to declare any untaxed income, even if you haven't specifically been told to file a return.

If you're not sure whether or not you need to file a return for the 2020-21 tax year, here are a few circumstances that mean you do:

  • you've received a P800 form from HMRC to say you didn't pay enough tax last year
  • you're self-employed, part of a business partnership, or the director of a limited company
  • you have pre-tax investment income of £10,000 or more
  • you or your partner earn £50,000 or more and claim child benefit
  • you received untaxed income from abroad
  • you're a 'name' at Lloyds of London
  • you're a minister of religion
  • you're a trustee or representative of someone who has died
  • you're a trustee of a trust or a registered pension scheme.

Find out more:how to fill in a self-assessment tax return

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What happens if your tax return is late?

If you miss the tax return deadline, or you're late paying your tax bill, HMRC has the power to charge fines that become increasingly expensive over time.

If you file your tax return late

Due to the recent rule changes, charges for late tax returns won't kick in until 1 March 2022. However, bear in mind that the absolute deadline is midnight on 28 February - being just a day late could land you with an instant £100 fine.

What you owe will then gradually increase:

  • Up to three months late: £10 charged each day (capped at 90 days), plus the initial £100 fine
  • Six months late: either £300, or 5% of the tax owed (whichever is larger), plus the charges above
  • 12 months late: either £300, or 5% of the tax owed (whichever is larger), plus the charges above.

This is separate from what you'll owe for being late paying your tax bill.

If you pay your tax bill late

The 31 January deadline still stands for when your tax is due. From 1 February onwards, you'll be charged 2.75% interest on the tax you owe.

Usually, you'd receive a charge equal to 5% of the outstanding tax if you hadn't paid your bill by 3 March, however, this has been waived until 1 April 2022.

If your tax bill is six months late, you'll receive another 5% charge.

After 12 months, you'll be charged an additional 5%.

What if you can't pay your tax bill?

If you're going to struggle to pay the tax you owe by 31 January, or the extended deadline of midnight on 1 April, then you may be able to set up a Time to Pay arrangement.

This can be done online, and is suitable for you if the following circumstances apply:

  • you've submitted your 2020-21 tax return
  • you owe less than £30,000 in tax
  • you don't have any other payment plans or outstanding tax with HMRC
  • it's less than 60 days until the end of the payment window.

You can apply to set up this arrangement online; the tax you owe will be split into smaller chunks, and you'll be able to pay it over a period of 12 months.

If these circumstances don't apply to you, or you need longer to pay, call the payment services helpline on 0300 200 3822.

Try the Which? tax calculator

If you haven't filed your 2020-21 tax return yet, the Which? tax calculator can help you tot up your tax bill, and even suggests expenses and allowances you might have missed.

When you're finished, you can also use the tool to send your return directly to HMRC.

Try out the Which? tax calculator.