Act now to avoid missing the Self Assessment deadline
25 November 20  /  Insights

HMRC is advising people to act sooner rather than later to complete their Self Assessment tax return form. Although the deadline is 31st January 2020, HMRC is asking that people take action well ahead of this date to sort out any issues. The paper deadline passed on October 31st 2020, which means online tax returns are now the only option.
 
Tax returns are used by HMRC to collect income tax, enabling people to provide information about their income and savings so they can be taxed at the appropriate rate. You’ll need to complete a Self Assessment tax return if you’re self-employed as a sole trader and have earned more than £1,000, if you’re a partner in a business partnership and also if you have untaxed income from such sources as renting out a property, tips and commission, savings, investments and dividends, and foreign income.
 
Leaving your tax return until the last minute could potentially cause mistakes to be made, which may result in you filing late and incurring a financial penalty. For this reason, it’s advisable to take some time now and ensure everything is correct. Failure to file a tax return in time automatically incurs a £100 fine, which increases after three months, with interest charged on any taxes paid late at a rate of 2.6 per cent.
 
For those taxpayers who file on time, HMRC is allowing a ‘time to pay’ arrangement. This is designed to help anyone who has been adversely affected by the pandemic, giving the option of spreading the payment due in January over a number of affordable instalments. If you’ve had a difficult 2020 and think you’ll struggle to pay your Self Assessment tax bill in 2021, and owe up to £30,000, you can defer making payment in full until 31st January 2022. To apply for a deferral, you’ll need to use HMRC’s online Time to Pay service, details at https://www.gov.uk/difficulties-paying-hmrc
 
On the other hand, if you have overpaid and are due a refund, this will be paid as soon as your tax return has been filed and approved.
 
Given the current circumstances and the fact that everything is taking longer to process due to staff shortages and an increased workload, filing early gives HMRC plenty of time to assess what tax is due at the end of January and will also enable taxpayers to assess whether they need to use the ‘time to pay’ option.
 
For those on Universal Credit (due to unemployment or low income), early action is also beneficial. It’s important to establish as soon as possible any tax due, enabling you to put aside funds that will not then count towards DWP’s means-test, assessing eligibility for the scheme. To be eligible for Universal Credit you must be over 18 and under state pension age, with less than £16,000 in savings.
 
Please note, if you owe tax, you have until midnight on 31st January 2021 to pay, and if you didn’t file a tax return last year, but need to send one in this year, you’ll need to register, for details (click here).
 
Sources:

Express - HMRC warning: Britons urged to act fast on tax returns to avoid missing deadlines
Simply Business - When is the Self Assessment deadline in 2021?
Gov.uk - Self Assessment tax returns
Gov.uk - If you cannot pay your tax bill on time

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