Self-assessment penalties relaxed, but don’t rest too easy, warns LITRG

Despite the relaxation, LITRG is urging taxpayers to file online and pay their tax, or agree a time to pay arrangement, by 31 January 2022 if they can.² This is for two main reasons:

• Interest on late paid tax at 2.75 per cent per annum³ will still run from 1 February 2022.
• If an unexpected issue arises which prevents taxpayers from filing and paying their tax by the ‘concessionary’ dates of 28 February and 1 April 2022 respectively, penalties will be charged by reference to the normal statutory due dates.

There may be further consequences of missing the 31 January deadline:

• Certain benefits rely on Class 2 National Insurance contributions being paid by 31 January. Those paying late will need to contact HMRC separately for help.⁴
• Tax credit claimants who gave HMRC estimated income figures before the 31 July 2021 tax credits renewal deadline should normally provide actual income figures to the Tax Credit Office by 31 January 2022. HMRC have said that those unable to meet the 31 January date this year should report the figure as soon as possible thereafter. This further easement appears to be limited to those who can give HMRC a COVID-19-related reason for the delay.⁵
• HMRC would have longer to enquire into returns submitted after the statutory deadline.

Victoria Todd, Head of LITRG, said:

“We are pleased that HMRC are repeating the penalty relaxations which were put in place last year for 2019/20 tax returns because of the pandemic. This gives taxpayers more time if needed to file their 2020/21 tax return and pay their tax without penalties charged.

“But taxpayers need to be aware that this is a concession on penalties and not a change to the deadline – the 31 January deadline remains in place. There could be other consequences for taxpayers of taking advantage of the announcement and putting off dealing with their taxes until February. We recommend that taxpayers make every effort to meet the 31 January statutory deadline if possible. If necessary, taxpayers should consider using provisional or estimated figures.”⁶

Notes for editors

1. https://www.gov.uk/government/news/hmrc-gives-self-assessment-taxpayers-more-time-to-ease-covid-19-pressures
The concession does not apply to those filing on paper, for whom the normal 31 October 2021 deadline for 2020/21 returns has already passed (unless a later deadline applies – see note 2).

2. Unless a later deadline applies. See https://www.litrg.org.uk/tax-guides/tax-basics/self-assessment-understanding-basics#toc-when-must-i-send-my-tax-return-to-hm-revenue-and-customs-.

3. Rate applicable from 4 January 2022. The rate varies with changes in the Bank of England base rate. https://www.gov.uk/government/publications/rates-and-allowances-hmrc-interest-rates-for-late-and-early-payments/rates-and-allowances-hmrc-interest-rates#hmrc-late-payment-and-repayment-interest-rates

4. HMRC state in their press release (https://www.gov.uk/government/news/hmrc-gives-self-assessment-taxpayers-more-time-to-ease-covid-19-pressures):

“Self-employed taxpayers who need to claim certain contributory benefits soon after 31 January 2022, need to ensure their annual Class 2 National Insurance contributions (NICs) are paid on time. This is to make sure their claims are unaffected. Class 2 NICs are included in the 2020 to 2021 Balancing Payment that is due to be paid by 31 January 2022. Benefit entitlements may be affected if they:

• couldn’t pay their Balancing Payment by 31 January 2022
• have entered into a Time to Pay arrangement to pay off the Balancing Payment and other Self Assessment tax liabilities through instalments

Affected taxpayers should contact HMRC on 0300 200 3822 for help as soon as possible.”

5. HMRC’s press release (https://www.gov.uk/government/news/hmrc-gives-self-assessment-taxpayers-more-time-to-ease-covid-19-pressures) states:

“Where tax credits customers are unable to report their final/actual income for the 2020 to 2021 tax year by 31 January 2022, they should report the figure as soon as possible after 31 January. In most cases HMRC will update the income used to calculate finalised entitlement to tax credits if the delay is due to the impact of COVID-19.”

6. See LITRG guidance on taking reasonable care to get tax return entries right for information on the use of estimated or provisional figures. https://www.litrg.org.uk/tax-guides/tax-basics/enquiries-penalties-appeals-complaints-and-debt/tax-penalties#toc-what-does-reasonable-care-mean-

7. Low Incomes Tax Reform Group

The LITRG is an initiative of the Chartered Institute of Taxation (CIOT) to give a voice to the unrepresented. Since 1998 LITRG has been working to improve the policy and processes of the tax, tax credits and associated welfare systems for the benefit of those on low incomes.

The CIOT is the leading professional body in the United Kingdom concerned solely with taxation. The CIOT is an educational charity, promoting education and study of the administration and practice of taxation. One of our key aims is to work for a better, more efficient, tax system for all affected by it – taxpayers, their advisers and the authorities. The CIOT’s work covers all aspects of taxation, including direct and indirect taxes and duties. The CIOT’s 19,000 members have the practising title of ‘Chartered Tax Adviser’ and the designatory letters ‘CTA’, to represent the leading tax qualification.

Contact Hamant Verma, External Relations Officer, 0207 340 2702 [email protected]

First published: 07/01/22