During normal times if you can still remember those, January is an intense month for lots of Accountants. After a relaxing time over Christmas, we come back on full throttle to complete the self-assessment tax return season as the filing deadline is 31 January.
Figures published by HMRC at the beginning of this January indicated that around half of an anticipated 11m taxpayers had already filed their self-assessment forms, meaning the other half have not. This is staggering statistics. So how can 50% of tax returns be completed and filed in just one month? We are not saying we still have half the tax returns to file this month, but we have a fair few.
We accept that this year is a bit different. Many of you have been under immense pressure at work for the last ten months and completing your tax returns has not been your top priority. HMRC said this week that they will accept Covid-19 as a reasonable excuse this January for a taxpayer missing the filing date but we do not recommend that you do this for various reasons explained below but if you are really feeling poorly sorting out your taxes will be the last thing on your mind.
Firstly, there is no guarantee that HMRC will accept your reasons for late filing. HMRC has not laid out defined conditions whereby they will accept a late filing of the tax return. They say that after missing the filing deadline of 31st January 2021 you will be issued with a penalty notice. You then need to send in an appeal explaining how you were affected by the current pandemic and the general view is that they will accept anything that sounds reasonable. This is a time-consuming process requiring time and energy which you may not have in the first place. Once the appeal goes in you then complete your tax return as soon as you can which is a bit ambiguous too.
Secondly you will not have established your tax outgoings in 2021 or even considered the payments on account and whether they need revision downwards due to downturn of business or income since last April. All this can only be done when your tax return is prepared and the tax calculated. When cash is tight it is a bad idea to carry on not knowing what your future liabilities might be. You need a plan.
If paying your tax by the due date of 31st January 2021 is something you are worried about, remember that support is in place for those who may struggle to pay because you can now spread your liabilities of up to £30,000 over 12 months. HMRC has enhanced ‘Time to Pay’ arrangements so that taxpayers who have filed a self-assessment return and determined the amount of tax due for 2019/20 and the amount of any payments on account for 2020/21 will be able to make payments over an extended period.
This service enables the taxpayer to set up an instalment arrangement online without having to contact HMRC beforehand. However, Time to Pay arrangements are only available once the return has been filed. Please note that HMRC will charge interest on the late payments which is currently running at 2.6%pa.
You will need your Government Gateway ID and password to use the automated service. If we have always prepared your tax return you may not have one of these although you would have needed one to claim the self-employment grant (SEISS). You can access the Time to Pay via the following link below PLUS if you do not have a Gateway ID use the Create sign in details under the Green sign in box.
https://www.access.service.gov.uk/login/signin/creds
If your tax liability is more than £30,000 then you will need to call HMRC on 0300 200 3822. You will need your ten-digit unique tax reference number, details of your self-assessment liability and reasons why you cannot make the payment on time. There will be some rigorous questioning and then HMRC will suggest an instalment payment to you. If you have not used the Time to Pay facility before, the questions will be around your financial position including income, expenses, savings etc.
And finally ………. if you can find the time between work and home schooling (yes no more on that subject!) we encourage you to file your tax return by the end of the month ……… but please do not leave it until the last minute.