Don’t panic if you missed the 5 October Self Assessment registration deadline, all is not lost!

If you began ‘trading’ in the tax year 2020/21, which ran from 6 April 2020 to 5 April 2021, you must usually have told (or ‘notified’) HMRC by 5 October 2021 so that you can be taxed under Self Assessment and pay any National Insurance contributions (NIC) you owe.

This may include if you started a side hustle in 2020/21 – for example, if you sell things or work through an online platform such as Etsy, Uber or TaskRabbit.

If you have missed the 5 October 2021 Self Assessment registration deadline, the key message is: don’t panic – just concentrate on meeting your obligations from now!

In this article, we look at three main scenarios and explain the situation for each, further:

Check if you actually need to register for Self Assessment
If you do need to register for Self Assessment and have missed the 5 October registration deadline
Where a penalty becomes chargeable 

Check if you actually need to register for Self Assessment

If you sell things online, you may not need to register for Self Assessment if you are not ‘trading’.

There is a distinction between (1) regularly selling things you have bought or made specifically to sell on with a view to making a profit, or (2) occasionally selling things you do not need any more or because you want to clear some space.

If your activity falls under point (1), then HMRC will generally consider that you are trading, and you should normally register for Self Assessment and complete a tax return like any other self-employed individual (unless your gross income is £1,000 or less in a tax year – see below).

If your online selling does not amount to trading, you probably don’t need to register for Self Assessment (although you may be subject to capital gains tax, many sales of personal items are exempt and in any case your capital gains may be within your annual exempt amount).

If your gross trading/miscellaneous income (before expenses) is £1,000 or less, you may not need to register for Self Assessment

The ‘trading allowance’ is available to exempt trading income (including miscellaneous income) of £1,000 or less per tax year from income tax. This might include income from platforms like Etsy (if your selling amounts to trading), Uber, Deliveroo or TaskRabbit.

(There is a separate £1,000 property allowance for property income, which might cover income from renting out an owned asset such as your driveway or your home through something like JustPark or Airbnb. You can use both allowances if you have both types of income, however for the remainder of this article, we will concentrate on the trading allowance.)

If your gross trading or miscellaneous income (before expenses like platform fees or commissions and things like materials or mileage) is £1,000 or less, then you have no taxable income from the activities. This means there is no need to register for Self Assessment and include the income on a Self Assessment tax return and no need to tell HMRC about it at all (and as such, there can be no failure to notify!)

For completeness: If you need to complete a Self Assessment tax return for another reason, then you do not need to include income that is fully covered by the trading allowance and if you have previously been in Self Assessment but now don’t need to be because of the trading allowance, then you could phone HMRC and ask them to withdraw any notice to file they have sent.

There may be some occasions when it is preferable for you to report the income to HMRC rather than use the trading allowance. It is also important to understand that you still need to report the income covered by the trading allowance for some means-tested benefits, such as universal credit (although not for tax credits). There is more explanation on our website.

Important note – some people think that if your trading profit is within your personal allowance (£12,570 for 2021/22) then you don’t need to complete a tax return. However, this overlooks the fact that even if there is no tax to pay, Class 2 and 4 NIC (the type of NICs paid by self-employed people) kicks in at a lower level. For this reason (and many others, including, that you might want to pay Class 2 NIC voluntarily, you might want to claim a loss, and you might want to prove your income, HMRC’s position is that anyone who is self-employed who has income above the £1,000 trading allowance needs to complete a tax return. You can read more about this in our guidance. 

If you do need to register for Self Assessment and have missed the 5 October registration deadline

As mentioned above, there are penalties for failing to notify HMRC of a new source of income by 5 October, which are based on the tax (and Class 2/4 NIC) that could potentially be lost as a result of the failure to notify on time (‘potential lost revenue’). We explain exactly how ‘failure to notify’ penalties are calculated in our guidance. 

Where the 5 October deadline is missed, you should still register as soon as you can. This is because as long as any tax and NIC due is paid on time (for the 2020/21 tax year, this would be by 31 January 2022), there will be no potential lost tax revenue and thus no failure to notify penalty to pay. Similarly, there also cannot be a failure to notify penalty if there is nothing to pay by 31 January 2022 (for example because your profit was low and below the tax and NIC thresholds) as there will be no potential lost revenue.

As well as paying what you owe, you will probably need to file your tax return by 31 January 2022. Occasionally, because HMRC give people three months to file a tax return after the notice to file has been issued, the filing deadline will actually be after 31 January 2022. In these instances, it is important to understand that the tax payment deadline of 31 January 2022 does not change regardless of when a notice to file is issued, so you will still need to pay and tax and NIC you owe by 31 January 2022 (which you will probably have to estimate, if your tax return is still pending) to avoid a failure to notify penalty.

Where a penalty becomes chargeable…

First things first, ask yourself if you have a ‘reasonable excuse’ for having not done what you should have. If circumstances stopped you meeting your obligations, then you may have one and you can and should appeal the penalty. If you don’t have a reasonable excuse, then read on….

If you didn’t register for Self Assessment by 5 October, and also miss the 31 January 2022 deadline and do have tax to pay (which is paid more than 30 days late), then three different types of penalties are potentially applicable:

• a late filing penalty – (which is at a fixed rate, at least initially),
• a late payment penalty (which is based on the amount of tax outstanding and is different from late payment interest), and
• a failure to notify penalty.

It is worth noting that when it comes to ‘tax geared’ penalties (penalties that are determined by reference to an amount of tax), HMRC will not seek to penalise you twice. This means, for example, that if you face a failure to notify penalty (which will be based on the 2020/21 tax liability) and a late payment penalty (also based on the 2020/21 tax liability), you should not pay more than the highest amount (not both).

It’s a small but important point and you can find confirmation of it in HMRC’s technical manual along with an example here. Note, some late filing penalties are not tax geared, which is why both late filing and late payment penalties can be charged.