The annual personal tax return crunch-time is now far in our rear-view mirror, much to the delight of accountants and tax advisers across the UK. Yet HMRC’s relaxing of the rules due to the pandemic has made for some confusion for individuals in Self Assessment.
The good news: HMRC will not pursue penalties as long as returns had been submitted online by 28 February, a month later than usual. Equally, no late payment penalties will be charged as long as you have paid your liability, or if you enter into a Time to Pay arrangement, by 1 April.
On paper (and in the papers) HMRC’s extension means there would be no repercussions for filing your tax returns late, or making payment a couple of months down the line – it sounds like a great deal, relieving a bit of financial pressure from directors with dividend payments, the self-employed and members of Limited Liability Partnerships.
The not-so-good news: as this temporary relaxing of the rules is not a statutory change, HMRC will still charge interest on any payments made after the original 31 January deadline. This could end up exacerbating the issue for those with the inability to pay a lump sum by the deadline, as the amount due continues to grow.
Crucially, if your tax return is submitted after the original deadline, you also lose the rights to pay voluntary Class 2 National Insurance Contributions which is the cheapest way to contribute towards a year of your state pension pot for those taxed through Self Assessment.
Neither of these negatives were particularly well advertised, meaning people who have made use of the relaxed rules may in fact end up getting the short end of the stick, twice in one go.
In any case, there are sure to be individuals caught out by these unfortunate facts on April Fool’s Day – irony indeed…