Self-assessment penalties relaxed, but don’t rest too easy, warns LITRG

The Low Incomes Tax Reform Group (LITRG) welcomes today’s (Thursday) announcement from HMRC that they will not charge late-filing penalties for 2020/21 self-assessment tax returns filed online on or before 28 February 2022. HMRC have also announced that no late payment penalties will be charged for those who pay their 31 January tax bill in full or set up a payment plan by 1 April 2022.1  
Despite the relaxation, LITRG is urging taxpayers to file online and pay their tax, or agree a time to pay arrangement, by 31 January 2022 if they can.2 This is for two main reasons:

  • Interest on late paid tax at 2.75 per cent per annum3 will still run from 1 February 2022.
  • If an unexpected issue arises which prevents taxpayers from filing and paying their tax by the ‘concessionary’ dates of 28 February and 1 April 2022 respectively, penalties will be charged by reference to the normal statutory due dates.

There may be further consequences of missing the 31 January deadline:
Certain benefits rely on Class 2 National Insurance contributions being paid by 31 January. Those paying late will need to contact HMRC separately for help.4

  • Tax credit claimants who gave HMRC estimated income figures before the 31 July 2021 tax credits renewal deadline should normally provide actual income figures to the Tax Credit Office by 31 January 2022. HMRC have said that those unable to meet the 31 January date this year should report the figure as soon as possible thereafter. This further easement appears to be limited to those who can give HMRC a COVID-19-related reason for the delay.5
  • HMRC would have longer to enquire into returns submitted after the statutory deadline.

Victoria Todd, Head of LITRG, said: 

“We are pleased that HMRC are repeating the penalty relaxations which were put in place last year for 2019/20 tax returns because of the pandemic. This gives taxpayers more time if needed to file their 2020/21 tax return and pay their tax without penalties charged.

“But taxpayers need to be aware that this is a concession on penalties and not a change to the deadline – the 31 January deadline remains in place. There could be other consequences for taxpayers of taking advantage of the announcement and putting off dealing with their taxes until February. We recommend that taxpayers make every effort to meet the 31 January statutory deadline if possible. If necessary, taxpayers should consider using provisional or estimated figures.”6