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Just one week to go before HMRC begins imposing penalties for late payment of self-assessment tax

Publications featured in include: Daily Express
  • Overdue tax bills are already incurring 2.6% in interest
  • Taxpayers should appeal incorrect penalties as HMRC cancelled over 60% last year

HMRC announced it would delay imposing penalties for the late payment of self-assessment tax by one month to 1 April to help those whose finances have been impacted by the COVID pandemic. 

Late payment penalties for outstanding tax bills which are charged six and 12 months after the deadline have also been pushed back to August 2021 and February 2022, respectively. However, individuals with an outstanding tax bill have been incurring interest of 2.6% since the 31 January self-assessment deadline expired. 

Those who aren’t in a position to pay their bills now should speak to HMRC about a Time to Pay arrangement urgently. This would enable them to spread out the payment over a longer timeframe and avoid a late payment fine. 

Taxpayers who receive a late payment penalty from HMRC which they believe to be incorrect, should consider making an appeal as HMRC often issues late payment penalties in error. HMRC initially imposed £275m* in penalties for late payment of self-assessment tax last year and over 60% or £167m was later cancelled following appeals by taxpayers. 

Graham Boar, partner at our Letchworth office says: “Taxpayers are running out of time to pay their tax bill before they are hit with a late payment penalty. Because of COVID, HMRC offered a grace period but that is running out.

The past success rate of appealing late payment penalties suggests that taxpayers shouldn’t panic if they are incorrectly charged with a penalty. HMRC has proven that it will hold its hands up if it’s made a mistake.

HMRC is actively encouraging taxpayers to make use of Time to Pay arrangements, this could be a lifeline for individuals who know they will struggle to pay their tax bill on time. If they choose to ignore it, they’ll only see the money owed increase even further.” 

Taxpayers can set up an online self-serve Time to Pay arrangement for tax bills up to £30,000 to spread repayments over a 12-month period – nearly 117,000 UK taxpayers have done so**. For debts that are greater than £30,000, taxpayers will need to get in touch with HMRC directly. 

*HMRC, 2018/19 (latest available data)
**HMRC, 22 March 2021

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