Yahoo Finance Why Brits need to file UK tax return now and not January
People who submit self-assessment (SA) tax returns should try to file it earlier, rather than waiting until the 31 January deadline.
Tax and advisory firm Blick Rothenberg is advising to complete self-assessment now to enable payers to create a strategy for dealing with outstanding and deferred tax debt before the deadline hits.
Fiona Fernie, a tax dispute and resolution partner at the firm said: “The deferral of the July 2020 payment on account means many people are facing a much higher bill in January 2021 than they would normally.
“Indeed, statistics show that the amounts of SA payments received by HMRC in July 2020 totalled £4.8bn [$6.2bn] compared to £9.34bn in July 2019, suggesting that a significant number of taxpayers took the opportunity to defer their payment on account.”
Fernie suggests that people should get ahead to understand what level of tax bill they are facing and how they will meet it.
If a 2019/20 return is submitted before December 2020, statements from HMRC will show payments due on the 31 January. Payers can do this online.
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Surprise payments could include deferred July 2020 payments, any 2019/20 balancing charge and the first 2020 to 2021 payment on account.
Fernie said: “If self-assessment taxpayers act now and contact HMRC, those who are unable to pay in full by 31 January 2021 can pay their tax by instalments and can set up a Time to Pay (TTP) instalment arrangement, (subject to interest rates set by HMRC, currently 2.6% per annum), without penalty.
“There is no obligation to declare that the taxpayer has been impacted by COVID-19.”
Setting up payments is subject to the payer having no tax returns, no other tax debts, no HMRC or TTP arrangements, if the self-assessment tax bill ranges between £32 and £30,000 and that it is no more than 60 days since tax was due for payment.
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Late payment penalties
Late payment penalties are charged when a tax payment is 30 days, six months or 12 months overdue, but can be avoided if a TTP arrangement is made before the bill is due, and all owed tax under that arrangement is paid on time.
Fernie said: “It is therefore key for taxpayers to apply for a TTP arrangement well in advance of 31 January 2021, to avoid any last-minute problems with the online system, so that the instalment plan can be agree prior to the tax becoming due.”
She added: “Even if the tax owed is in excess of £30,000, it may be possible to make a TTP arrangement with HMRC, but these arrangements cannot be made via the online system and acceptance is not guaranteed.
“In these circumstances it is therefore even more imperative that the application is made well in advance of the 31 January 2021 deadline, to ensure that the arrangements are in place by that date and avoid potential penalties.”
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