Be wary of penalties despite "welcome" self assessment deadline extension, experts say

Self assessment taxpayers must remain conscious of late penalty fees despite the much-needed respite gained from this year’s one-month deadline extension, industry participants have said.

On January 6, 2022, HMRC announced that it would waive the late filing and late payment penalties for one month (until February 28) for the 2020 to 2021 tax year. The original deadline was January 31.

HMRC said that it “recognises the pressures faced by self assessment taxpayers and their agents”, and that the waiver gives more time to those whose capacity has been affected by Covid-19.

However, HMRC has said that this must not be viewed as an extension as such, and that interest will still be payable from February 1.

“At a time when owners of businesses are facing increased pressures from inflation as well as the continued impact of Covid absences, the extension is welcome,” said Trusha Shah, tax manager at HW Fisher.

“But many may well overlook the application of late paid interest from the original filing deadline, which could come as an unwelcome surprise.”

A variety of penalties can be applied to self assessment taxpayers depending on the severity of the lateness. For instance, £100 if it is up to three months late and £10 per day for 90 days thereafter, or five percent once it is six months late (or £300 if greater).

“They often leave it too late”

For Shah, it’s vital that the clients have everything they need in advance, as they often leave it to the last minute.

“Make sure that you have the relevant information from banks and agents such as interest certificates, annual rental and investment statements, as requesting these at the last minute often delays the preparation and submission of tax returns.”

She also warns of the “often forgotten” changes of residency status when moving in or out of the UK, urging taxpayers to declare this along with the sale or disposal of an asset that has tax implications.

In addition, 2020 to 2021 tax returns must include declarations of grants of payments received from Covid-19 support schemes. This could include the Self-Employment Income Support Scheme, Coronavirus Job Retention Scheme, or other support such as self-isolation payments and local authority grants.

HMRC has a helpline to assist companies with payment matters such as instalment arrangements, suspending debt collection proceedings, cancelling penalties and interest.