Penalty looms for unpaid Self Assessment tax bills

LITRG is warning taxpayers who have not yet paid or agreed a payment plan with HMRC for their 2020/21 Self Assessment tax liability that they only have a week left to avoid a penalty. If any of the 2020/21 liability remains outstanding on 2 April 2022, taxpayers will be charged a penalty of five per cent of the amount which was outstanding on 3 March 2022.1
Some taxpayers may not yet have filed their 2020/21 Self Assessment tax return and have already received a £100 late-filing penalty. LITRG urges these taxpayers to:

  • prepare and submit their tax return online as soon as possible;2 and
  • pay any remaining 2020/21 liability to HMRC before 2 April 2022 or arrange a payment plan.

Delaying action until after Friday next week means that HMRC will charge a late-payment penalty, if there is any tax owing, on top of any late-filing penalty already issued.

Tom Henderson, Technical Officer for LITRG, said:

“If you have not yet finalised your Self Assessment tax affairs for 2020/21, including submitting your tax return and settling any payment due, you should do so before 2 April 2022 to avoid potentially triggering a late-payment penalty. This penalty will not be levied if the amount owing is included in a time-to-pay arrangement, but this needs to be arranged before 2 April 2022 and the tax return must be submitted first.”

Setting up a time-to-pay arrangement is straightforward and can be done online. It protects the taxpayer from late-payment penalties, but not late payment interest, which is currently charged at three per cent per annum, increasing to 3.25 per cent from 5 April.3

Tom Henderson said:

“If you cannot submit your tax return because HMRC have not yet issued a Unique Taxpayer Reference (UTR), then the usual payment deadlines still apply if you were late notifying HMRC of your liability to tax.4 Normally, it is necessary to provide the UTR in the payment reference when making any payment to HMRC. However, you may be in time to avoid triggering the late-payment penalty by making a payment to HMRC by cheque, if it would clear HMRC’s account before 2 April 2022.5

“If HMRC charge a late payment penalty and you have a reasonable excuse for not having made the payment, then you can appeal the penalty. However, claiming insufficient funds to pay is not treated as a reasonable excuse, unless it is attributable to events outside your control.”6