HMRC waives Self Assessment late filing and late payment penalties for one month to ease Covid-19 pressures

HMRC has announced it will be waiving late filing and late payment penalties for Self Assessment taxpayers for one month – giving them extra time, if they need it, to complete their 2021 tax return and pay any tax due.

This recognises the continued capacity pressures faced by taxpayers and agents caused by the impact of Covid-19, and in particular the new Omicron variant. This repeats the actions taken by HMRC last January for the same reasons, just with a little more notice this time around.

The penalty waiver means that anyone who cannot file their return by the 31 January deadline will not receive a late filing penalty if they file online by 28 February, and anyone who cannot pay their tax by the 31 January deadline will not receive a late payment penalty if they pay their tax in full, or set up a Time to Pay arrangement, by 1 April 2022.

However, it should be noted that there is no change to the filing or payment deadline and other obligations are not affected. The deadline to file and pay remains 31 January 2022 and interest will be payable from 1 February, as usual, so it is still better to pay on time if possible.

Interest will be charged on late payments at 2.75%. Assuming taxpayers have sufficient funds to settle their tax liabilities, they would be best advised to submit their tax returns and pay their tax liabilities by 31 January. This is because these funds will be attracting negligible interest in their own bank account and late payment interest of 2.75% can be saved by submitting and paying on time.

Any tax returns received online in February will still be treated as received late, with a valid reasonable excuse for the lateness. This means that:

1. there will be an extended enquiry window for HMRC to investigate your tax return.
2. for returns filed after 28 February the other late filing penalties (daily penalties from three months, six and 12-month penalties) will operate as usual
3. a 5% late payment penalty will be charged if tax remains outstanding, and a payment plan has not been set up, by midnight on 1 April 2022. Further late payment penalties will be charged at the usual six and 12-month points (August 2022 and February 2023 respectively) on tax outstanding where a payment plan has not been set up

Whilst the penalty waiver will come as welcome news for many, it is still advisable for taxpayers to get their tax returns completed and filed by 31 January 2022 so they know how much tax is due in good time, avoid late payment interest; and give themselves plenty of time to arrange payment plans if required.

The existing Time to Pay service allows people who need the option to spread their tax payments over time. Self Assessment taxpayers with up to £30,000 of tax debt can do this online once they have filed their return.

Should HMRC be unable or unwilling to support this request, businesses can utilise specialist funders to borrow the amount required to settle their tax bill. Read more.